Share Purchase Agreement Drafting in India
A share purchase agreement sets out price, conditions, warranties and closing steps when shares of a company are sold.
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A share purchase agreement (SPA) is the contract under which a seller transfers shares of a company to a buyer for an agreed price. It is used by founders selling a stake, investors buying out co-investors, promoters exiting a business and groups restructuring holdings. The document fixes the price and payment mechanics, the conditions that must be met before closing, what the seller promises about the company, and who bears the loss if those promises prove wrong. Our team prepares the SPA, coordinates the transfer paperwork and company filings, and flags tax and foreign exchange points that arise in the deal.
Who provides this service: our legal documentation team, with anything that requires an advocate handled through a practising advocate.
Who Needs Share Purchase Agreement?
- Founders or promoters selling all or part of their stake in a private company
- Investors acquiring shares from existing shareholders or buying out a co-investor
- Non-resident buyers or sellers dealing in shares of an Indian company
- Family groups reorganising shareholding between relatives or group entities
- Companies facing a management buyout or an exit by a departing partner
Key Benefits
- Price, payment timing and any deferred or escrowed amounts written in plain, unambiguous terms
- Conditions precedent listed so both sides know exactly what must happen before closing
- Seller representations and warranties matched to what the buyer actually learned in due diligence
- Indemnity, limitation and claim-notice mechanics that avoid disputes after closing
- Transfer deed, board approvals and register updates coordinated alongside the agreement
- Foreign exchange reporting flagged early where the buyer or seller is a non-resident
How It Works
Deal term sheet and structure review
We review the agreed commercial terms, the shareholding pattern, the articles of association and any existing shareholder agreement to confirm what is being sold, by whom and with what restrictions.
Due diligence inputs
Findings from the buyer's legal, financial and tax checks are collected so that warranties, disclosures and specific indemnities reflect real risks rather than generic template language.
Drafting the SPA and disclosure schedule
Our professionals draft the agreement covering price, payment, conditions precedent, warranties, indemnity, covenants and termination, with a disclosure schedule that records known exceptions against the warranties.
Negotiation and finalisation
Comments from both sides are consolidated, open commercial points are marked for the parties to decide, and the final text is settled before signing and stamping as required by the applicable state stamp law.
Closing and transfer formalities
On closing, the transfer deed or demat instruction is executed, board approval is recorded, payment is confirmed and the register of members and related company records are updated.
Post-closing filings and reporting
Where a non-resident is involved we assist with the foreign exchange reporting through the authorised dealer bank, and we help update statutory filings and records to reflect the new shareholding.
Documents Required
- Term sheet or letter of intent between buyer and seller
- Company's memorandum and articles of association
- Latest shareholding pattern and register of members
- PAN and identity or incorporation documents of buyer and seller
- Share certificates or demat holding statements
- Board and shareholder resolutions approving the transfer, where required
- Existing shareholders agreement or investment agreement, if any
- Recent audited financial statements and tax filings of the company
- Valuation report, where the pricing needs support
- Bank details and any escrow arrangement terms
Timeline and Fees
Indicative timeline: Drafting usually takes about 5-10 working days from receiving the term sheet; negotiation, stamping and closing depend on the parties and the authorities involved.
Professional fee: The fee depends on deal size and complexity, the number of parties, whether due diligence input is needed, and whether foreign exchange reporting or negotiation support is required. Share your term sheet for a scoped quote.
What Can Go Wrong if This Is Missed or Done Incorrectly
- Vague conditions or payment terms can leave the buyer paying without receiving clean title to the shares
- Missing warranties or weak indemnity wording can leave a buyer without recourse for undisclosed liabilities
- Transfers that ignore restrictions in the articles or a shareholders agreement may be challenged or refused registration by the company
- Delayed or missed foreign exchange reporting on non-resident transfers can attract regulatory action and compounding
- Insufficient stamping can make the document inadmissible as evidence until the shortfall and any penalty are paid
Frequently Asked Questions
What is a share purchase agreement and when is it needed?
A share purchase agreement is a written contract in which a seller agrees to transfer shares to a buyer on stated terms. It is needed whenever the sale involves more than a simple handover, such as deferred payment, warranties about the company, or conditions that must be satisfied before the transfer is completed.
Is the SH-4 form enough, or do I also need an SPA?
The share transfer deed, commonly called SH-4 for physical shares, only records the transfer itself. It does not deal with price adjustments, warranties, indemnity or exit conditions. For anything beyond a very simple transfer between known parties, an SPA records the commercial deal that the transfer deed does not cover.
Is stamp duty payable on a share purchase agreement and share transfer?
Stamp duty applies on the transfer of shares and may also apply to the agreement itself, depending on the state where it is executed. For shares held in demat form, duty is generally collected through the depository process. Rates and rules are set under stamp law, so check the current position with the relevant authority.
What extra steps apply if the buyer or seller is a non-resident?
Transfers between residents and non-residents are governed by foreign exchange rules, including pricing guidelines and a reporting requirement through the authorised dealer bank, commonly done using Form FC-TRS. Timelines and eligibility conditions are set by RBI, so the deal structure should be checked before signing.
What are representations and warranties in an SPA?
They are statements the seller makes about the company, such as ownership of the shares, compliance with law, accuracy of accounts and absence of undisclosed disputes. If a statement turns out to be untrue, the buyer can claim compensation under the indemnity clause, subject to the limits agreed in the agreement.
Can the transfer be completed in stages?
Yes. Many deals provide for staged closing, deferred consideration or part of the price held in escrow until certain conditions are met. These arrangements must be written carefully, including what happens if a condition fails, so that neither side is left with an unclear position.
Official Sources
Rules, forms and fees change. Check the current position on the official portal:
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Disclaimer: The information on this page is for general informational purposes only and does not constitute professional legal, tax or compliance advice. Requirements vary by situation. Please consult a qualified CA or CS for advice specific to your needs. Government fees and timelines are subject to change; verify with the relevant authority before proceeding.