Share Purchase Agreement Checklist: What You Need to Know in India

A share purchase agreement (SPA) is a crucial legal document that governs the sale and purchase of shares between two parties. It sets out the terms and conditions of the transaction, including the price, payment terms, warranties and representations, and dispute resolution mechanisms.

If you are looking to buy or sell shares in a company in India, it is essential to have a comprehensive SPA in place to protect your interests. To help you with this process, we have put together a checklist of key items to consider when drafting or reviewing an SPA in India.

1. Parties: The SPA should clearly identify the buyer and seller, along with their respective addresses, contact details, and legal capacity to enter into the agreement. If the buyer or seller is a company, the SPA should also include the company’s registration number and status.

2. Shares: The SPA should specify the number and type of shares being sold, along with any restrictions or encumbrances on the shares. It should also clarify whether the shares being sold are free and clear of any liens, charges, or claims, and whether any consents or approvals are required to transfer the shares.

3. Purchase Price: The SPA should state the purchase price for the shares and how it will be paid, including any adjustments, holdbacks, or escrow arrangements. It should also set out the currency in which the payment will be made and the timeline for payment.

4. Warranties and Representations: The SPA should include warranties and representations from the seller regarding the company’s financial and legal status, ownership of the shares, and compliance with relevant laws and regulations. The SPA should also clarify what happens if any of these warranties or representations are breached.

5. Conditions Precedent: The SPA may include certain conditions precedent that must be met before the sale can proceed, such as obtaining necessary regulatory approvals, shareholder approval, or third-party consents. These conditions should be clearly stated and the consequences of failure to meet them should be spelled out.

6. Closing: The SPA should specify when and where the closing will take place, along with the documents and other items that must be exchanged at the closing. It should also clarify who will be responsible for paying any transfer taxes, fees, or other expenses.

7. Dispute Resolution: The SPA should include a dispute resolution mechanism, such as arbitration or mediation, to resolve any disputes that may arise between the parties. The mechanism should be clearly defined and the jurisdiction in which it will be administered should be specified.

8. Governing Law: The SPA should state the governing law that will apply to the agreement, which may be the law of the state where the company is incorporated or the law of the state in which the transaction is taking place.

Conclusion

A share purchase agreement is a critical document that can protect your interests when buying or selling shares in a company in India. By following this checklist, you can ensure that your SPA covers all the essential elements and that you are well-positioned to handle any disputes that may arise. If you need assistance with drafting or reviewing an SPA, consider consulting with an experienced legal professional in India who is well-versed in commercial law transactions.