Share Purchase Agreement in India: Meaning, Process & Legal Guide (2025)
A Share Purchase Agreement (SPA) is the most important legal document when buying or selling shares in a private company. Whether you are an entrepreneur exiting your startup, an investor acquiring equity, or a business owner transferring ownership, understanding this agreement helps avoid legal risks and financial losses.
What Is a Share Purchase Agreement?
A Share Purchase Agreement is a legally binding contract between a buyer and seller that defines the terms of share transfer, payment structure, liabilities, warranties, and obligations after the transaction.
Unlike an asset purchase, where specific business assets are acquired, an SPA allows the buyer to acquire ownership rights in the company itself through shares.
In India, SPAs are governed under the Companies Act, 2013 and regulatory guidelines issued by the Ministry of Corporate Affairs (MCA). Depending on the transaction structure, regulatory compliance from the Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI) may also apply.
How a Share Purchase Agreement Works in India
SPAs typically define rights and obligations between shareholders and investors. These agreements often work alongside corporate governance documents like a shareholders agreement, which regulates shareholder rights and voting structures.
For startups and early-stage ventures, SPA negotiations often follow structuring documents like a founders agreement that defines equity ownership between promoters.
Share Purchase Agreement vs Share Subscription Agreement
A Share Purchase Agreement involves buying existing shares from shareholders, whereas a Share Subscription Agreement involves issuance of new shares by the company. Businesses raising investment capital often combine both structures depending on funding strategy and regulatory approvals.
Key Clauses in a Share Purchase Agreement
Purchase Price and Payment Terms
This clause defines valuation, payment schedules, escrow mechanisms, and earn-out arrangements. Payment structuring directly impacts tax planning and investment cash flow.
Representations and Warranties
Sellers confirm financial accuracy, regulatory compliance, ownership of intellectual property, and absence of undisclosed liabilities. These clauses reduce risk exposure for buyers.
Protection of confidential business data and trade secrets often involves additional legal safeguards similar to a non-compete agreement.
Conditions Precedent
These conditions must be fulfilled before closing the transaction. Common requirements include board approvals, shareholder consent, financial due diligence, and regulatory filings.
Transfer of Shares and Closing
This section governs execution formalities, share transfer forms, regulatory reporting, and share certificate issuance through MCA filings.
Termination and Exit Rights
SPAs often include termination rights if transaction conditions are not satisfied, protecting both parties during deal closure.
How Long Does It Take to Buy Shares?
The timeline depends on complexity, regulatory approvals, and due diligence requirements. Private share transfers usually take a few days to several weeks depending on compliance requirements.
Investors and business owners conducting acquisitions often work alongside contracts like a vendor agreement when business acquisitions involve vendor transitions.
Can a Share Purchase Agreement Be Cancelled?
Cancellation depends on contractual termination clauses. Agreements may allow cancellation before closing if financing fails, approvals are not obtained, or warranties are breached.
Common Mistakes Businesses Make in SPA Transactions
- Improper valuation and financial due diligence
- Vague warranty clauses
- Ignoring tax implications
- Weak escrow or indemnity provisions
- Failure to structure shareholder rights post-acquisition
Do You Need a Lawyer for a Share Purchase Agreement?
SPAs involve complex compliance under corporate, tax, and investment regulations. Businesses commonly rely on online legal services to ensure agreements are enforceable, legally compliant, and structured to minimise risk.
How GetLawyer Helps with Share Purchase Agreements
Buying or selling company shares is a major corporate milestone. At GetLawyer, our corporate legal experts assist businesses and investors with:
- Detailed Due Diligence Review
- Custom SPA Drafting
- Investor Negotiation Support
- MCA and SEBI Compliance Assistance
- Post Transaction Legal Advisory
Planning to buy or sell company shares? GetLawyer provides professional support for shareholder structuring, SPA drafting, regulatory filings, and investment compliance ensuring secure and legally compliant transactions.
Going Forward with Confidence
Share Purchase Agreements represent major financial and ownership commitments. Proper legal drafting helps prevent disputes, ensures regulatory compliance, and protects investor interests.