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Share Purchase Agreement (SPA) in India – Drafting, Due Diligence & Closing

A Share Purchase Agreement records the terms on which a seller agrees to sell and a buyer agrees to purchase specified shares of a company — price, conditions, warranties, indemnities and completion steps.

An SPA is a contract between the parties. It is not the same as the prescribed securities transfer instrument (Form SH-4) — the actual transfer still has to be completed through the required corporate and registration formalities.

Consideration

Conditions Precedent

Warranties

Due Diligence

Indemnity

Completion

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Overview

What Is a Share Purchase Agreement?

A Share Purchase Agreement (SPA) is a legally binding contract under which a Seller agrees to sell, and a Buyer agrees to purchase, specified shares of a company on agreed terms — price, conditions, representations, warranties, indemnities and completion steps. It is particularly important for private-company deals, investor transactions and acquisitions involving detailed protections.

Contract, Not the Transfer Itself

The SPA creates the contractual arrangement. The actual transfer of shares is completed through the prescribed transfer instrument and company/depository formalities.

Seller, Buyer & Company

Typically the Seller and Buyer are the core parties; the Company may join where it has completion or disclosure obligations.

Protects Both Sides

Conditions precedent, warranties and indemnities allocate risk between Seller and Buyer before money changes hands.

Share Purchase Agreement Drafting and Closing

Transaction ContractNot the SH-4 Form

Why Is an SPA Important?

Buying shares means buying into the company's business, assets, liabilities and risks — the SPA is what allocates that risk.

Confirms Ownership & Title

Establishes that the Seller actually owns the Sale Shares, free from Encumbrances.

Locks Down Price & Payment

Consideration, payment schedule, escrow or earn-out terms are fixed in writing.

Sets Conditions Precedent

Board/shareholder approval, pre-emption waivers and consents required before Completion.

Allocate

Risk Before Closing

Captures Due Diligence

Warranties and the Disclosure Letter reflect what due diligence actually found.

Provides Indemnity Protection

Specific and general indemnities protect the Buyer against identified and warranted risks.

Defines Completion Steps

Who delivers what — share certificates, payment, board resolutions — and when.

Scope

What Does a Share Purchase Agreement Cover?

Sale Shares & Price

Class, number, face value and percentage of Sale Shares, plus the total and per-share purchase price.

Conditions Precedent

Board/shareholder approval, pre-emption waivers, third-party and regulatory consents.

Representations & Warranties

Seller, Buyer and, where applicable, Company statements on ownership, authority, tax, litigation and compliance.

Covenants

Pre-closing obligations to run the business in the ordinary course and not create new encumbrances.

Indemnity & Liability Limits

Specific and fundamental-warranty indemnities, caps, baskets, de minimis and claim periods.

Completion & Exit

Completion deliverables, termination rights, long-stop date and dispute-resolution mechanism.

Our Process

Step-by-Step SPA Drafting Process

Understand the Transaction

Identify Seller, Buyer, Company and verify existing shareholding.

Review AOA & Rights

Check transfer restrictions, ROFR/pre-emption and shareholder-agreement terms.

Structure Price & Warranties

Define consideration, conditions precedent, warranties, disclosures and indemnities.

Prepare Completion Checklist

Finalise the SPA and list every document each party must deliver at Completion.

Due Diligence

What Buyers Typically Check Before Signing

Corporate Records & AOA

Financial Statements

Litigation & Legal Notices

Tax Filings & Assessments

Material Contracts

Employee & IP Records

A seller's Disclosure Letter identifies exceptions to the warranties. Matters fairly disclosed there generally qualify the relevant warranty — so due diligence findings should feed directly into the SPA drafting.

Watch Out

Common Mistakes to Avoid

Not checking the AOA for transfer restrictions

Confusing the SPA with Form SH-4

Ignoring pre-emption / ROFR rights

No liability cap or claim period on warranties

Skipping the Disclosure Letter

Using a private-company template for listed shares

Clear Distinction

SPA vs Share Transfer Form (SH-4)

Particular	Share Purchase Agreement	Form SH-4
Nature	Detailed commercial contract	Prescribed transfer instrument
Contains	Warranties, conditions, indemnities	Transfer & consideration details
Negotiated?	Yes, between the parties	Prescribed format
Purpose	Records the full commercial deal	Used for the formal transfer process
Best Approach	Negotiate & Sign SPA → Satisfy Conditions → Execute SH-4 / Transfer Instrument → Register Transfer

Do not treat SH-4 as a substitute for the full commercial agreement, or the SPA as a substitute for the prescribed transfer instrument.

FAQs

Frequently Asked Questions

No. The SPA is the detailed commercial contract between Seller and Buyer, while Form SH-4 is the prescribed securities transfer instrument under Section 56 of the Companies Act, 2013 for applicable transfers.

No. The SPA creates contractual rights and obligations. The actual transfer and registration must still comply with applicable law and the company's or depository's procedures.

Not necessarily. A simple transfer may be documented through the applicable transfer instrument and corporate process, but a detailed SPA becomes important for transactions with negotiated commercial and legal terms.

A document in which the Seller identifies specific exceptions to the warranties given in the SPA, so the Buyer cannot later claim on a warranty for a matter that was fairly disclosed.

The company generally remains responsible for its own debts. Acquiring shares does not automatically erase existing company liabilities — this is exactly why warranties, disclosure and indemnities matter.

Not automatically — it is commercially negotiated between the parties. A typical SPA specifies a cap, a minimum claim amount, an aggregate basket and a claim period, often with exceptions for fraud or fundamental warranties.

Yes. The Articles of Association and any shareholders' agreement may contain pre-emption or right-of-first-refusal provisions that must be addressed before Completion can proceed.

Additional FEMA, RBI, tax, sectoral-cap and reporting considerations can apply. A standard domestic SPA template should not be used for a cross-border transaction without appropriate review.

Ready to Close Your Share Transaction?

A properly structured SPA connects price, conditions, warranties, disclosure and completion into one document — reducing surprises after the deal closes.

Understand Transaction → Verify Shareholding → Review AOA & Rights → Structure Price & Conditions → Draft Warranties & Indemnities → Completion Checklist → Finalise SPA

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