A share purchase agreement plays a vital role in any company acquisition or divestiture. It helps both parties clearly understand their roles and protects their legal interests throughout the transaction.

Contents of a Share Purchase Agreement

• Parties – Identification of the buyer and seller, including their legal names and addresses.
• The Seller(s) – Current holder(s) of the shares being sold; may be an individual, a group, or a company.
• Sale Shares – Details of the shares involved, such as quantity, class, and any transfer restrictions.
• Purchase Price – The agreed price for the shares, along with payment terms and possible adjustments.
• Representations and Warranties – Assurances given by both parties about the accuracy of shared information.
• Indemnification – Clauses that protect each party from losses due to breaches or legal issues.
• Closing Conditions – Requirements that must be fulfilled before completing the transaction, like regulatory approvals.
• Termination Provisions – Conditions that allow either party to end the agreement, such as unmet closing requirements.

Process of Share Sale Purchase Agreement

• Letter of Intent (LOI) – A preliminary, non-binding document that outlines the basic terms of the intended transaction.
• Due Diligence – A thorough review of the company’s financial, legal, and operational aspects to confirm the accuracy of disclosed information.
• Negotiation of Share Purchase Agreement – Drafting and finalizing the agreement terms based on due diligence results and LOI terms.
• Execution of Share Purchase Agreement – Signing of the agreement by both parties' authorized representatives.
• Closing – Finalizing the transaction through share transfer and payment as per agreed terms.

Advantages of Share Purchase Agreement in India

• Clarity of Transaction – Specifies key details like number of shares, price, and payment terms, minimizing ambiguity and ensuring transparency.
• Defined Rights and Liabilities – Clearly assigns responsibilities to both parties, reducing chances of future conflict.
• Comprehensive Warranties – Offers buyer protection by ensuring accuracy of data, legality of transfer, and disclosure of liabilities.
• Confidentiality Clauses – Safeguards sensitive company information from being disclosed to unauthorized parties.
• Dispute Resolution Provisions – Includes pre-agreed procedures (e.g., arbitration or mediation) to resolve conflicts efficiently.
• Tax Optimization – Allows structuring of the transaction in a tax-efficient way for both parties.
• Regulatory Compliance – Ensures the deal adheres to Indian legal and regulatory frameworks.
• Due Diligence Support – Facilitates thorough investigation into the company’s records, helping buyers assess risks.
• Smooth Ownership Transfer – Details procedures for share certificate handling, registration, and record updates.
• Future Claim Protection – Includes clauses that shield the buyer from liabilities arising due to past actions of the seller.

Documents Required for Share Purchase Agreement

The specific documents may vary by transaction, but commonly required ones include:

• Share Certificates – Evidence of ownership of the shares being transferred.
• Board Resolution – Authorisation from the seller’s company approving the share sale.
• No Objection Certificate (NOC) – From regulatory authorities, if applicable.
• Tax Registration Certificates – PAN, GST, or other relevant tax IDs of both parties for compliance.

Share Purchase Agreement Format

The format of a share purchase agreement may vary based on the transaction and legal requirements, but it generally includes:

• Introduction – Identifies the buyer and seller and states the purpose of the agreement.
• Definitions – Clarifies key terms used in the agreement to avoid ambiguity.
• Sale and Purchase of Shares – Specifies the number of shares, purchase price, and payment terms.
• Representations and Warranties – Outlines declarations made by both parties about the company and the transaction.
• Indemnification – Details liability protection provisions for both parties.
• Closing Conditions – Lists conditions that must be fulfilled before the transaction is finalized.
• Termination Provisions – States when and how the agreement can be ended by either party.