Sale and Purchase Agreements for NZ Businesses: Key Clauses and Risks

Buying or selling a business is exciting - but it can also feel like you’re stepping into a maze of numbers, deadlines, and “must-have” legal documents.

One document usually sits right at the centre of the deal: the sale and purchase agreement (often called an SPA). If you get this agreement right, it can protect you from nasty surprises and make the handover smoother. If you get it wrong (or use a generic template), it can create disputes, delays, or expensive issues after settlement.

In this guide, we’ll break down what a sale and purchase agreement is, how it works in New Zealand business deals, and the key clauses you should understand before you sign.

What Is A Sale And Purchase Agreement (SPA)?

A sale and purchase agreement is a legally binding contract that sets out the terms for one party to sell, and another party to buy, a business (or business assets, or shares in a company).

In plain terms, it answers the big questions:

• What’s being sold? (assets, shares, stock, intellectual property, goodwill, customer lists, etc.)
• How much is being paid? (purchase price and how it’s calculated)
• When does it happen? (timing, conditions, settlement date)
• What needs to be true before settlement? (conditions precedent like finance approval or landlord consent)
• What happens if something goes wrong? (warranties, indemnities, termination rights, dispute processes)

While people often talk about an “SPA” like it’s one standard document, there’s no one-size-fits-all. A good sale and purchase agreement is tailored to the specific deal structure and the risks that matter in your industry.

It’s also worth noting: many business deals start with a smaller “pre-deal” document (like a term sheet or heads of agreement) and then move to the SPA once both sides are ready to lock in the detail.

Is Your Deal A Share Sale Or An Asset Sale (And Why It Matters)?

Before you can draft or review a sale and purchase agreement properly, you need to be clear about what type of sale you’re doing. In New Zealand, most business acquisitions fall into one of two categories:

1) Share Sale

In a share sale, the buyer purchases the shares in the company that owns the business. The company stays the same legal entity - meaning the business’s contracts, employees, and obligations generally remain with the company, but the ownership changes.

That can be convenient, but it’s also why due diligence (and warranties) become a major focus. You’re effectively buying into the company “as is”, including its existing (and sometimes unknown) liabilities, unless the SPA allocates risk differently (for example, through specific indemnities or disclosures).

If you’re doing a share sale, it’s common for the SPA to work alongside (or require updates to) documents like a Shareholders Agreement, especially where there will be multiple shareholders after completion.

2) Asset Sale

In an asset sale, the buyer purchases specific business assets (for example, equipment, stock, website, brand assets, customer contracts) rather than buying the company itself.

This can give the buyer more control over what they take on - and what they leave behind - but it also means the SPA must be very clear about what’s included and what’s excluded. Importantly, while asset sales can reduce the risk of inheriting historical liabilities, some liabilities can still follow depending on the circumstances and how the transaction is structured (and what the parties agree in the SPA).

Asset deals are commonly documented using an Asset Sale Agreement (which is essentially a sale and purchase agreement designed for an asset transaction).

Why This Choice Changes The Legal Risks

The share sale vs asset sale decision affects:

• Liability exposure: what legal obligations you’re inheriting (or leaving behind), and what the SPA says about who wears what risk
• Contract transfers: whether customer/supplier contracts need consent, assignment or novation
• Employees: whether employment remains with the same employing entity, or whether new employment arrangements are needed
• Tax treatment: what’s being paid for (and how price is allocated) - you should get tax advice from an accountant or tax adviser for your specific deal
• Regulatory approvals: whether licences/consents can transfer or need re-application

If you’re unsure which structure is right, it’s worth getting advice early - changing the structure later can be messy (and expensive).

What Should A Sale And Purchase Agreement Include?

A strong sale and purchase agreement doesn’t just list the price and the settlement date. It should also anticipate the “what ifs” that commonly derail business sales.

Here are clauses and sections you’ll commonly see in a sale and purchase agreement NZ businesses use (and why they matter).

Description Of What’s Being Sold

The SPA should clearly describe the sale items, which may include:

• plant and equipment
• stock (and how stock is valued at settlement)
• intellectual property (brand names, domain names, designs, software, content)
• customer databases and goodwill
• leases (or rights to occupy premises)
• supplier contracts and customer contracts (if transferable)

This section is especially important in an asset sale. If something isn’t clearly included, you may find the buyer assumes it’s part of the deal while the seller assumes it’s excluded (or vice versa).

Purchase Price And Payment Terms

The SPA should set out:

• the purchase price (fixed amount or a calculation)
• deposit (if any) and when it’s payable
• how payment occurs (bank transfer on settlement, instalments, deferred payment)
• price adjustments (stock valuation, debtors/creditors adjustments, working capital adjustments)

Some deals also include earn-outs (where part of the purchase price depends on post-sale performance) or vendor finance. These can be workable, but only if the drafting is tight and the risks are properly managed.

Conditions Precedent (What Must Happen Before The Sale Goes Through)

Most SPAs include conditions that must be satisfied before settlement, such as:

• buyer finance approval
• landlord consent to assign a lease
• third-party consents to transfer key contracts
• regulatory or licensing approvals
• due diligence completion (to the buyer’s satisfaction)

If conditions are drafted vaguely, you can end up stuck in limbo - unsure whether the deal is binding, whether you can walk away, or whether the other side can force settlement.

Warranties And Representations

Warranties are promises about the state of the business. They’re one of the biggest protection tools in a sale and purchase agreement.

For example, a seller might warrant that:

• financial statements are accurate
• there are no undisclosed debts
• tax obligations have been met
• the business complies with relevant laws
• key assets are owned by the seller (and not subject to finance/security interests)
• there are no major disputes or claims pending

From the buyer’s perspective, warranties are often the “safety net” if something turns out to be untrue after settlement. From the seller’s perspective, warranties need careful limits (for example, time limits, monetary caps, and disclosure schedules) so you’re not exposed indefinitely.

Restraint Of Trade And Non-Solicitation

Many business buyers pay for goodwill - the value of the brand, reputation, and customer base. A buyer will often want confidence that the seller won’t open up next door and take the customers back.

This is where restraint clauses come in. In New Zealand, restraints need to be reasonable to be enforceable (for example, in terms of time, geography, and scope). A “too broad” restraint might not hold up if challenged.

Transition Support And Handover Obligations

A sale doesn’t end at settlement. Many deals include a transition period where the seller helps the buyer with introductions, training, supplier relationships, or system handover.

Your SPA can specify:

• how long the handover lasts
• whether support is included in the purchase price or billed separately
• what the seller must deliver (logins, manuals, supplier lists, customer notices)

This is one of those areas that’s easy to gloss over - until you realise, post-settlement, that you don’t have access to key systems or the seller has disappeared overseas.

Due Diligence: What You Should Check Before Signing An SPA

Due diligence is the process of verifying what you’re buying (or preparing what you’re selling) before the SPA becomes unconditional.

If you’re the buyer, due diligence helps you confirm the business is what it claims to be. If you’re the seller, preparing for due diligence helps prevent delays and reduces the risk of later warranty claims.

Common Due Diligence Areas For NZ Business Sales

• Financial: profit/loss, cashflow, debts, aged receivables, forecasts, tax filings
• Commercial contracts: key customer and supplier agreements, termination rights, change-of-control clauses
• Employment: employment agreements, contractor arrangements, leave liabilities
• Property: lease terms, assignment rights, rent reviews, landlord consent requirements
• Regulatory compliance: licences/permits required to operate, health and safety obligations
• Data and privacy: how customer information is collected, stored, and used
• Intellectual property: who owns the brand, website, domain names, designs, software and content

If your business collects customer details, runs email marketing campaigns, or stores sensitive information, it’s worth checking whether your data practices align with the Privacy Act 2020 and whether a Privacy Policy (and supporting internal processes) is in place. Buyers are increasingly sensitive to privacy risk, especially where the value of the business relies on customer lists and repeat sales.

It can also be smart to have the deal documented in a way that’s consistent with the broader transaction steps - for example, running through a Completion Checklist so nothing gets missed on settlement day.

Key Legal Issues Small Businesses Often Miss In Sale And Purchase Agreements

When you’re time-poor and trying to keep the business running during a sale, it’s easy to focus on the “big ticket” terms only (price and timing) and miss the finer points that actually create risk.

Here are some common issues we see for small business owners.

1) Employees And Employment Liabilities

If staff are part of the business, you’ll need to think carefully about what happens to them on sale.

Depending on the structure of the deal (share sale vs asset sale), employees may:

• remain employed by the same company (share sale), or
• need to be offered employment by the buyer (asset sale) and moved across by agreement - which can involve consultation and careful planning.

Either way, you’ll want to confirm employment terms are documented properly (including role, pay, hours, and termination provisions) and that liabilities like leave are correctly accounted for. Having up-to-date Employment Contract documentation can make the process much smoother and reduce disputes at settlement.

2) Assigning Contracts And Leases

Many small businesses rely on a few key contracts - think major customers, main suppliers, a software platform agreement, or a lease for premises.

But contracts often can’t be transferred automatically. You may need third-party consent, or you may need a formal assignment or novation.

For premises, it’s common to require landlord consent and an assignment process. If a lease is being transferred, this is where a properly drafted Deed Of Assignment Of Lease can be crucial.

3) The Difference Between “Signing” And “Unconditional”

A lot of business owners assume the deal is “done” when the SPA is signed. In reality, many SPAs are signed subject to conditions - meaning they don’t become unconditional until those conditions are satisfied or waived.

This matters because your obligations (and your ability to walk away) can change dramatically depending on whether the agreement is conditional or unconditional.

If you’re negotiating timelines or relying on the sale proceeds (for example, to fund another purchase), you’ll want clear terms around what makes the deal unconditional and what happens if conditions aren’t met.

4) Restraints That Are Too Broad (Or Too Weak)

For sellers, it can feel frustrating to be “locked out” of your own industry after selling. For buyers, it can feel risky if the restraint is so narrow that it doesn’t actually protect goodwill.

The right restraint clause is usually a balancing act. It’s also one of those areas where getting advice is worth it - an unenforceable restraint clause can be almost as bad as having no restraint at all.

5) Disputes About What Was Promised

Business sales often involve a lot of verbal discussions: future projections, customer relationships, “it’ll be fine,” and other informal assurances.

New Zealand has strong rules against misleading conduct in trade, and statements made during negotiations can create legal risk under the Fair Trading Act 1986. That’s why your SPA should clearly record what’s being relied on, what has been disclosed, and what isn’t being promised.

It’s also why both sides should be careful about marketing claims or representations during the sale process - especially where the buyer is relying on the seller’s statements about revenue, margins, or contracts.

Key Takeaways

• A sale and purchase agreement is the main contract that sets out what’s being sold, the price, the timeline, and the protections for both buyer and seller.
• The structure of your deal matters: share sales and asset sales allocate risk and liabilities differently, and your SPA needs to match the structure.
• A well-drafted SPA should address key issues like conditions precedent, warranties, restraints, handover obligations, and what happens if things go wrong.
• Due diligence is where buyers confirm what they’re really purchasing and sellers reduce the risk of disputes later - don’t rush it or treat it like a checkbox exercise.
• Small businesses often run into trouble around employees, assigning leases/contracts, and confusion about when a deal becomes unconditional.
• Even if your deal feels “simple”, your SPA should be tailored - generic templates can leave gaps that cost you far more than you save.

Note: This article is general information only and isn’t tax or accounting advice. Tax outcomes can vary depending on how the deal is structured - it’s a good idea to speak with an accountant or tax adviser for advice specific to your situation.

If you’d like help buying or selling a business, or you want a lawyer to draft or review your sale and purchase agreement, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.