What Do You Sign Before Buying or Selling a Business in Singapore?

Short answer: in most Singapore business sales, the parties sign a non-disclosure agreement (NDA) first, then agree the headline deal in a term sheet or letter of intent (LOI), then the buyer carries out due diligence, and only then do both sides sign the sale and purchase agreement (SPA) that actually transfers the business. Singapore law does not require this exact sequence. It is common practice, and each document has a different job: the NDA protects information, the term sheet or LOI records the agreed price and terms, and the SPA is the binding contract.

This guide explains what each document does, what is usually binding and what is not, and where Singapore's official rules come in, such as stamp duty on a share transfer. It is general information, not legal advice. Have a lawyer review anything you sign.

What order are the documents usually signed in?

A typical small or mid-sized deal moves through these steps:

1. Initial enquiry. The buyer sees a listing and asks for more detail. The seller shares only non-identifying, high-level information.
2. NDA. Before the seller reveals the business name, financials, staff or supplier details, the buyer signs a confidentiality agreement.
3. Term sheet or LOI. Once the buyer has seen enough to make an offer, both sides write down the proposed price, structure and key conditions.
4. Due diligence. The buyer checks the accounts, contracts, licences, lease, staff and liabilities.
5. SPA and completion. The lawyers turn the agreed terms into the sale and purchase agreement, both sides sign, and ownership passes on completion.

Some deals use only a term sheet, some only an LOI, and small asset deals sometimes skip both and go straight from NDA to a short SPA. The order matters more than the labels: protect information first, agree the deal in principle second, verify third, and commit last.

What does an NDA do in a business sale?

An NDA (also called a confidentiality agreement) is a contract in which the buyer promises to use the seller's information only to evaluate the deal and not to disclose it to others. For a seller, it is the gate before sharing anything that could hurt the business if it leaked, such as profit figures, the fact that the business is for sale, or lists of staff, customers and suppliers.

Points a business-sale NDA usually covers:

• What counts as confidential information, and what does not (for example, information already public).
• Who on the buyer's side may see it, such as lawyers, accountants and financiers.
• How long the obligation lasts, and what happens to the information if the deal falls through, typically return or destruction.
• Sometimes, a promise not to approach the seller's staff, customers or suppliers.

Unlike a term sheet, an NDA is normally intended to be binding in full. That is the whole point of it. For what to share at each stage, see what documents sellers need.

What is a term sheet, and how is it different from an LOI?

Both record the main commercial terms the parties have agreed in principle before spending money on due diligence and lawyers. The two labels are often used interchangeably in Singapore. Where people draw a distinction, a term sheet tends to be a short list of terms, while an LOI is written as a letter from the buyer setting out its intention to buy on those terms.

Either document typically sets out:

• The deal structure: buying the company's shares, or buying the business and its assets. This choice changes what you inherit, including staff, licences and tax (see below).
• Price and how it is paid: a deposit, payment on completion, and any amount held back or paid later.
• What is included: equipment, stock, brand, website, social media accounts, customer lists.
• Conditions: satisfactory due diligence, financing, landlord approval of the lease, new licences being granted to the buyer.
• Timeline for due diligence and a target completion date.
• Exclusivity and confidentiality, covered next.

Is a letter of intent legally binding in Singapore?

Usually only in part, and only if it says so. Most term sheets and LOIs state that the price and commercial terms are not binding and that no one is obliged to complete until the SPA is signed. They then make a few specific clauses binding, commonly confidentiality, exclusivity, costs and governing law.

Whether a document is binding depends on its wording and on what the parties intended, so a carelessly drafted LOI can create obligations nobody meant to take on. If the document is silent, ask a lawyer before you sign it. Make it state clearly which clauses bind and which do not.

What does exclusivity in an LOI mean?

An exclusivity clause (sometimes called a no-shop clause) stops the seller from negotiating with other buyers for a fixed period while the buyer does due diligence. Buyers want it because due diligence costs time and professional fees. Sellers should keep it short and tie it to progress, because while it runs they cannot take other offers. There is no legal standard length. The period is whatever the parties agree, so set a firm end date and say what happens when it expires.

Where does due diligence fit?

Due diligence comes after the term sheet or LOI and before the SPA. That is deliberate: there is little point checking a business in detail before the price is agreed in principle, and little sense signing a binding SPA before you have checked it. What the buyer finds often feeds back into the final price, the warranties and the conditions in the SPA. For a full checklist, see what due diligence buyers need.

Some findings depend on the deal structure. MOM says a transfer of shares or of assets only is not a transfer of employment under Section 18A of the Employment Act, while a transfer of the business as a going concern is (what happens to staff in a takeover). In food businesses, SFA says food retail licences are non-transferable, so a buyer of the business must apply for its own.

What does the SPA add, and what official steps follow it?

The SPA is the binding contract. It turns the agreed terms into enforceable obligations and adds the detail that a term sheet leaves out, such as warranties from the seller, indemnities, conditions that must be met before completion, and what happens if they are not.

In a share sale, the transfer has official steps. According to IRAS, stamp duty on a transfer of shares is 0.2% of the purchase price or the value of the shares, whichever is higher. IRAS says a document signed in Singapore must be stamped within 14 days after it is first signed (30 days after it is received in Singapore if signed overseas) to avoid penalties, and that the share transfer instrument should be stamped before it is lodged with ACRA. Your lawyer or corporate secretary normally handles these filings.

Do I need a lawyer for these documents?

You are not required to use one, but each of these documents can create legal obligations, and the SPA in particular should be drafted or reviewed by a Singapore lawyer. See do you need a lawyer to buy a business and how to negotiate business sale terms for the commercial side.

Looking for a business to buy, or ready to sell? Browse businesses for sale or list your business on SG Business Mart.

Frequently asked questions

What documents do you sign before buying a business in Singapore?

Usually a non-disclosure agreement (NDA) first, then a term sheet or letter of intent (LOI) setting out the agreed price and key terms, then the sale and purchase agreement (SPA) after due diligence. Singapore law does not require this exact sequence; it is common practice, and smaller deals may skip the term sheet or LOI.

Should the NDA come before sharing financials?

Yes. Sellers usually ask for a signed NDA before revealing the business name, financial statements, or staff, customer and supplier details. Before that, only high-level, non-identifying information is normally shared.

Is a letter of intent legally binding in Singapore?

Usually only in part. Most LOIs and term sheets say the price and commercial terms are not binding until the SPA is signed, while clauses such as confidentiality, exclusivity, costs and governing law are made binding. Whether a document binds depends on its wording and the parties’ intention, so have a lawyer check it before signing.

What is the difference between a term sheet and an LOI?

Both record the main deal terms agreed in principle before due diligence, and the labels are often used interchangeably. A term sheet is usually a short list of terms; an LOI is usually a letter from the buyer stating its intention to buy on those terms.

How long should exclusivity in an LOI last?

There is no legal standard. The exclusivity period is whatever buyer and seller agree. Sellers generally keep it short with a fixed end date, because they cannot negotiate with other buyers while it runs.

Does due diligence happen before or after the LOI?

Usually after. The term sheet or LOI fixes the price and terms in principle, the buyer then checks the business, and the findings feed into the final SPA.

Is stamp duty payable when buying shares in a Singapore company?

Yes. IRAS says stamp duty on a transfer of shares is 0.2% of the purchase price or the value of the shares, whichever is higher. The document must be stamped within 14 days after it is first signed in Singapore (30 days after receipt if signed overseas), and before the share transfer is lodged with ACRA.

Do I need a lawyer to prepare an NDA, LOI or SPA?

It is not mandatory, but each document can create legal obligations. Having a Singapore lawyer draft or review the SPA in particular is strongly advisable. This guide is general information, not legal advice.