Share Purchase Agreement Law in India: An Overview
A Share Purchase Agreement (SPA) is a legal document that is used for the purchase and sale of shares in a company. In India, the SPA is governed by various laws, including the Companies Act, 2013, the Securities and Exchange Board of India (SEBI) Regulations, and the Indian Contract Act, 1872.
In an SPA, the buyer and the seller agree on the terms and conditions of the share purchase, including the purchase price, payment terms, and the timing of the transaction. The SPA also includes representations and warranties made by the seller about the shares being sold, along with the indemnification provisions to protect the buyer against any loss resulting from breaches of those representations and warranties.
The SPA must be carefully drafted and reviewed to ensure that it meets all legal requirements in India. For instance, the SPA must comply with the SEBI Takeover Regulations, which regulate the acquisition of shares in a public company beyond a certain threshold limit.
Moreover, the SPA must also comply with the foreign exchange regulations if the buyer is a foreign entity. If the buyer is a foreign entity, they must obtain the necessary approvals from the Reserve Bank of India before acquiring shares in an Indian company.
In India, there are two types of SPAs that are commonly used: a share purchase agreement for the purchase of shares in a private company and a share purchase agreement for the purchase of shares in a public company.
For a share purchase agreement in a private company, the SPA must be executed by both the buyer and the seller, and the company must also be notified of the transaction. The share transfer must then be recorded in the company`s share transfer register.
In the case of a share purchase agreement for a public company, the SPA must be registered with SEBI, and the buyer must make an open offer to the public shareholders of the company. The buyer must also comply with SEBI regulations related to pricing, disclosure, and other matters.
Overall, the SPA is a crucial document in the purchase and sale of shares in a company. It is essential to ensure that the SPA complies with all legal requirements in India to avoid any legal disputes or regulatory issues later on. It is always advisable to seek legal advice from an experienced lawyer when drafting or reviewing a share purchase agreement in India.