How to approach completion mechanics and conditions in a cross-border SPA

A cross-border share purchase agreement is, at its core, a sequencing problem. The parties may have aligned on price and structure weeks before signing – but the gap between signature and completion is where deals fail. Regulatory clearances stall. Escrow funds sit in the wrong jurisdiction. A condition precedent is satisfied in form but contested in substance. For a principal with exposure across the Mainland, Hong Kong, and an offshore holding centre, those gaps are not theoretical.

Completion mechanics and conditions in a cross-border SPA are the contractual rules that govern what must happen, in what order, before legal and beneficial ownership of a target company passes from seller to buyer. In a transaction with Hong Kong as the forum hub – and counterparties or assets in the PRC Mainland, the BVI, the Cayman Islands, or the UAE – those mechanics must account for at least two governing legal systems, multiple regulatory perimeters, and the practical question of which court or tribunal can compel performance if a step fails. The governing instrument is ordinarily the SPA itself, construed under the chosen governing law, supported by the Companies Ordinance (Cap. 622) for Hong Kong companies and the relevant offshore company statute for BVI or Cayman targets.

This guide walks the sequence in order: the upfront decision on structure and governing law; the conditions precedent and how to draft them; the pre-completion period and its obligations; the mechanics of completion day itself; the common mistakes our desk sees in cross-border deals; and a short decision checklist for in-house counsel.

What decision does the buyer actually face before the SPA is signed?

Before any condition is drafted, the buyer must answer a question that shapes every downstream mechanic: is this a completion-accounts deal or a locked-box deal? The answer determines when risk and economics pass, how the purchase price adjusts, and what information the seller must produce before and after completion.

In a locked-box structure (a fixed-price mechanism where economic ownership passes as at an agreed historical balance-sheet date), the buyer carries economic risk from that date forward. The mechanics focus on confirming that no leakage (permitted and unpermitted value transfers from the target to the seller) has occurred between the locked-box date and completion. In a completion-accounts structure (where the purchase price adjusts post-completion against a set of accounts prepared as at the completion date), the buyer does not carry economic risk from signing; instead, the parties negotiate the accounting principles and the adjustment mechanism. Each approach carries its own set of conditions and its own enforcement risk.

In our cross-border M&A practice, we see locked-box structures used frequently in transactions where the seller is a private-equity sponsor or where the target sits in a jurisdiction – such as the Cayman Islands – where reliable management accounts can be prepared quickly and audited on a compressed timetable. Completion-accounts structures remain more common in Mainland-connected deals where the target's books are prepared under PRC GAAP and the buyer requires an independent reconciliation before price is fixed. The choice is not purely commercial: it determines the shape of the conditions precedent, the length of the pre-completion period, and the post-completion dispute risk.

The buyer should also resolve, at this stage, the question of governing law and dispute resolution. A Hong Kong governing-law clause, backed by HKIAC arbitration or the jurisdiction of the Hong Kong courts, gives the parties access to a common-law system with strong enforcement tools – including the reciprocal-enforcement regime for Mainland judgments that came into force under the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) on 29 January 2024. A Cayman or BVI governing-law clause may suit the holding structure but complicates enforcement of completion obligations against a Mainland or Hong Kong party.

The sequence above describes the standard position. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost. For a structured review of the governing-law and structure decision, write to us at info@lockhartyip.com.

How should conditions precedent be structured in a cross-border deal?

Conditions precedent (CPs) are the gates the deal must pass through before completion can occur. In a cross-border SPA, the CP schedule is one of the highest-risk sections of the document – not because it is technically difficult, but because poorly drafted CPs create a class of dispute that is hard to resolve and easy to weaponise.

A well-constructed CP schedule in a cross-border deal has three characteristics. First, every condition is allocated clearly: it is either a buyer condition (whose satisfaction depends on the buyer's own acts or circumstances) or a seller condition, or a mutual condition – and the obligation to use best or reasonable endeavours to satisfy it is explicit. Second, the outside date (the long-stop date – the date after which either party may walk away without liability if CPs remain outstanding) is realistic for the longest regulatory clearance actually required. Third, the consequences of a failed or waived CP are spelled out: does failure give a right to terminate, a right to claim damages, or both?

In deals with PRC Mainland elements, the CP schedule will commonly include approval or filing with the relevant PRC regulatory authority, MOFCOM (the Ministry of Commerce of the People's Republic of China) or its delegated counterpart, and, where the buyer is state-connected or the deal crosses certain thresholds, a national security review filing. Where the target has operations in Hong Kong, the SFC (Securities and Futures Commission) or HKMA (Hong Kong Monetary Authority) may be a required approver. Each of these has its own timetable, its own application formalities, and its own scope for the relevant authority to request supplemental information – all of which compress the practical time available before the long-stop date.

The common drafting error our desk sees is a CP that requires "all regulatory approvals" without specifying the approvals contemplated. A buyer that signs an SPA with that language has, in effect, given the seller a dispute-trigger. If an unexpected regulatory filing emerges – a competition clearance in a third jurisdiction, for example – the question of whether it falls within the CP becomes a negotiating lever in what should be an administrative process. The fix is to schedule the anticipated approvals by name, jurisdiction, and regulatory body, and to agree a procedure for handling unexpected filings.

For further context on governing-law choices in SPAs with Hong Kong connections, see our guide at Share purchase agreement governed by Hong Kong or elsewhere.

What obligations govern the pre-completion period?

Once the SPA is signed and CPs are in train, the target company continues to operate. The pre-completion period – the window between signing and completion – is governed by a set of seller covenants that restrict what the seller and the target may do without the buyer's consent.

These covenants serve two functions. The first is protective: the buyer has agreed a price on the basis of a particular asset and business; the pre-completion covenants are the mechanism for ensuring the asset is not materially changed before the buyer takes control. The second is structural: where the deal involves a Mainland or offshore company, the covenants must align with what is legally permissible under the governing company law. A covenant requiring shareholder consent for a material transaction must account for whether the target's constitutional documents require a board resolution, a shareholders' meeting, or both – and what notice period applies under the relevant statute.

In practice, the pre-completion period in a cross-border deal involving PRC regulatory clearances is often six to nine months. That is a long period in which business conditions can shift. Our desk regularly sees disputes arise from two sources: first, a seller who treats a permitted act more broadly than the buyer anticipated; and second, a buyer who exercises its consent rights over ordinary-course decisions in a way that the seller treats as obstruction. The SPA must anticipate both scenarios, with a clear definition of ordinary course of business (the standard against which permitted acts are measured) calibrated to the target's actual business, not a generic formulation from an English-law precedent.

A micro-scenario illustrates the point. An Asian strategic buyer signed an SPA for a mid-market target with operating companies in both the Mainland and Hong Kong (autumn 2025). The pre-completion period ran to nine months pending a Mainland approval. The seller, treating a routine financing as ordinary-course, drew on a revolving credit facility that the buyer considered a material new obligation. The dispute over whether the draw-down was permitted delayed the clearance process by a further three months and required a renegotiation of the long-stop date. The issue was entirely preventable by a defined list of acts requiring buyer consent, with a threshold specified for new indebtedness.

How does completion day work in a cross-border SPA?

Completion day is a sequenced set of actions that must occur in a defined order and, in a cross-border deal, often across time zones. The SPA's completion mechanics clause should set out each step explicitly: what is delivered, by whom, at what time, and what constitutes good delivery (delivery that satisfies the contractual obligation).

The standard sequence runs as follows. The seller delivers the agreed documents: duly executed stock transfer forms or share certificates (as applicable under the target's company law), board minutes approving the registration of the buyer, resignation letters of outgoing directors, and any ancillary agreements. The buyer simultaneously – or conditionally upon receipt of the seller's documents – releases the purchase price to the seller's designated account. If an escrow arrangement (a mechanism under which a neutral third party holds funds pending satisfaction of conditions) is in place, the escrow agent releases the funds on confirmation from both parties that the completion steps have been performed.

The sequencing question – who moves first? – is not merely procedural. It is an enforcement question. In a cross-border deal where the seller is a Mainland entity and the buyer is a Hong Kong or offshore vehicle, the practical enforceability of a completion obligation against a non-performing party turns on the governing-law clause, the dispute-resolution clause, and the assets available for enforcement. If the SPA provides for HKIAC arbitration seated in Hong Kong, the buyer has access to the interim-measures Arrangement that has been in force since 1 October 2019, which permits a party to a Hong Kong-seated arbitration to apply to a Mainland court for interim measures – including asset-freezing orders – before or during the arbitration. That is a significant tool if the seller threatens to dissipate assets in the pre-completion or post-completion window.

Where the target is a BVI or Cayman company, completion mechanics must also address the formalities of share transfer under the relevant offshore statute. A BVI company transfers shares by entry in the register of members; delivery of a transfer form without updating the register does not pass legal title. The SPA should require the seller to procure the update of the register as a completion step, with evidence of registration provided at or immediately after completion.

If an earlier filing, structure or enforcement attempt produced an adverse or stalled result, a second read can identify the strategic error and the routes still open. Write to us at info@lockhartyip.com.

What do foreign counsel get wrong in cross-border completion mechanics?

The most frequent error our desk sees is the importation of a template from one jurisdiction into a cross-border deal without adaptation. English-law SPA precedents assume that a completion-day delivery is a set of paper documents exchanged at a single location. That assumption does not hold when the seller is in Shanghai, the target is a Cayman holdco, the operating company is in Hong Kong, and the buyer's counsel is in a third country.

The specific points of failure are four. First, the completion mechanics clause does not specify what constitutes delivery for documents that will be transmitted electronically. Electronic execution of share transfer forms is not uniformly accepted across the relevant jurisdictions; the SPA must address the position under each governing company law. Second, the escrow mechanics do not account for the time difference between the Hong Kong banking day and the seller's jurisdiction, creating a window in which neither party is technically in default but funds are neither in transit nor at rest. Third, the MAC (material adverse change) clause is drafted on English or US precedent without reference to what constitutes a material adverse change to a Mainland-connected business – currency controls, export-licence revocations, and regulatory restrictions on specific sectors are not ordinarily treated as MACs in English-law precedent but may be existential for a target with Mainland operating exposure.

Fourth, and most commonly: the dispute-resolution clause is an afterthought. A cross-border SPA with an arbitration clause that does not specify the seat, the rules, and the number of arbitrators has, in effect, no dispute-resolution clause. The HKIAC Administered Arbitration Rules (currently the 2024 Rules, effective 1 June 2024) provide a complete set of default rules once the parties have agreed to HKIAC arbitration and specified the seat. A clause that references "arbitration in Hong Kong under HKIAC rules" is sufficient to trigger those defaults; a clause that says "the parties will agree on arbitration" is not an arbitration clause at all.

For our work on joint ventures with cross-border completion structures, see also our guide at Joint venture between a foreign investor and a UAE partner.

A decision checklist for in-house counsel

The following checklist captures the material decision points our desk works through at the start of a cross-border SPA engagement. It is not exhaustive. Every deal has its own fact pattern and its own priority order. But the absence of a considered answer to any of these questions at signing is a predictable source of completion risk.

• Governing law and forum. Is the governing-law choice appropriate for the jurisdictions of the parties and the target? Does the dispute-resolution clause specify seat, rules, and tribunal composition? Can a Hong Kong-seated award be enforced where the counterparty's assets sit?
• Price mechanism. Is this a locked-box or completion-accounts structure? If locked-box, is the leakage definition calibrated to the target's actual distribution and payment practices? If completion-accounts, are the accounting principles agreed and the adjustment mechanism unambiguous?
• CP schedule. Are all anticipated regulatory approvals named by jurisdiction and authority? Is the long-stop date realistic given the longest clearance timetable? Are the consequences of CP failure or waiver explicitly stated?
• Pre-completion covenants. Is the definition of ordinary-course business calibrated to the target's sector and operating model? Are the consent thresholds for new indebtedness, capital expenditure, and key contracts specified numerically?
• Completion mechanics. Does the clause specify what constitutes good delivery for each document, including electronic documents? Is the sequencing of seller obligations and buyer payment explicit? Where escrow is used, is the release mechanism and the identity of the escrow agent confirmed before signing?
• Offshore formalities. If the target is a BVI or Cayman company, does the SPA require register update as a completion step? Is the confirmation of registration a condition of payment release?
• Enforcement tools. Is HKIAC arbitration with Hong Kong seat included? Does the SPA provide for interim relief? Is the interim-measures Arrangement relevant given the counterparty's Mainland asset base?
• Post-completion. Are the seller's post-completion obligations – indemnities, restrictive covenants, transitional services – time-bound and enforceable under the governing law?

A second micro-scenario illustrates the checklist in action. A European corporate buyer acquiring a Hong Kong-incorporated operating company from a BVI holdco seller (spring 2026). The price mechanism was locked-box; the locked-box date was set six weeks before signing. The CP schedule included a Mainland business-licence filing that the parties initially overlooked, as the target's principal trading activity was in Hong Kong. The filing added eleven weeks to the pre-completion period. Because the SPA had specified a long-stop date that assumed only Hong Kong formalities, the parties were required to renegotiate the extension, which the seller used as leverage to adjust the leakage definition. The outcome was satisfactory, but the renegotiation was avoidable. A cross-border deal with any Mainland connection – even indirect – requires a full mapping of the regulatory perimeter at the outset.

Our practice at Lockhart & Yip M&A & Transactions handles exactly these sequencing and structuring questions across the Hong Kong, Mainland, and principal offshore corridors.

How the enforcement angle shapes every mechanic

Completion mechanics are not purely contractual. They are, ultimately, enforcement instruments. A completion obligation that cannot be compelled against a non-performing party is a statement of intent, not a legal right. In a cross-border SPA, the enforcement angle must be built into the document from the outset – not added as an afterthought when performance fails.

The reciprocal-enforcement regime under Cap. 645, in force since 29 January 2024, allows effective Mainland judgments in civil and commercial matters to be registered with the Court of First Instance in Hong Kong – and, by the corresponding Mainland procedure, Hong Kong judgments to be recognised in the Mainland. The old requirement of an exclusive-jurisdiction clause has been removed; the test is now connection-based. For a buyer who has obtained a Hong Kong court judgment against a Mainland seller on a completion-related claim, this is a materially improved enforcement tool compared to the position before that date.

For arbitration, the position is well-established. A Hong Kong-seated HKIAC award can be enforced in the Mainland under the 1999 Arrangement and its 2020 Supplemental Arrangement. Since the 2021 amendment to the Supplemental Arrangement, simultaneous enforcement applications – in both Hong Kong and the Mainland – have been permitted. That simultaneous-application route is relevant where the seller holds assets in both jurisdictions and the buyer needs to act quickly to prevent dissipation.

The interim-measures tool – available in Hong Kong-seated arbitrations since 1 October 2019 – allows a party to apply to a Mainland court for a preservation order before the arbitral proceedings are formally commenced. For a buyer who suspects a seller may transfer assets to frustrate a completion obligation, that tool provides a genuine pre-completion deterrent, provided the arbitration agreement is properly drafted and the HKIAC is notified in the required form.

The enforcement angle is also relevant at the level of the dispute-resolution clause itself. A clause that provides for ad hoc arbitration (arbitration without an administering institution) forfeits the interim-measures tool under the Arrangement, which is available only to arbitrations administered by the designated institutions. A clause that provides for court proceedings in a jurisdiction whose judgments cannot be registered in the relevant counterparty's home jurisdiction forfeits the reciprocal-enforcement route. These are not abstract drafting points: they determine whether a completion-day dispute is resolved in weeks or in years.

Related practices

• Disputes & Arbitration – enforcement of cross-border completion obligations and interim-measures applications
• Holding Structures – alignment of BVI, Cayman and Hong Kong holding vehicles with SPA mechanics

Speak with Lockhart & Yip

For a scoped view of your matter, contact info@lockhartyip.com. Discuss your matter →

Related

• Ma Transactions
• Joint Venture Between Foreign Investor Uae Partner Uae 2
• Share Purchase Agreement Governed By Hong Kong Or 5

This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.