A share purchase agreement (SPA) records the terms on which a buyer purchases existing shares from a seller: price and payment, conditions precedent, representations and warranties, indemnities, closing mechanics and post-closing covenants. In India, share transfers also involve stamp duty, board approval under the articles, and FEMA pricing and reporting where a non-resident is involved.
Core clauses
- Parties, shares and purchase price
- Conditions precedent and long-stop date
- Representations and warranties by the seller
- Indemnity, caps and survival periods
- Closing deliverables and payment mechanics
- Non-compete and non-solicit
- Dispute resolution and governing law
Due diligence first
Legal, financial and tax due diligence shapes warranties, specific indemnities and price adjustments.
Regulatory points
- Check transfer restrictions in the articles.
- Pay stamp duty on transfer.
- For non-resident parties, follow FEMA pricing guidelines and file FC-TRS.
- Sectoral approvals where applicable.
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Get expert help →SPA vs SSA
An SPA covers purchase of existing shares from shareholders; a share subscription agreement covers fresh shares issued by the company.
Frequently asked questions
Is an SPA mandatory for share transfer?
Legally, a transfer can happen with a transfer deed, but an SPA is essential in any significant deal to allocate risk and set conditions.
What is an indemnity in an SPA?
An indemnity obliges the seller to compensate the buyer for specified losses, such as breaches of warranty or pre-closing tax liabilities.
Who pays stamp duty on share transfer?
Stamp duty is typically paid by the buyer unless the parties agree otherwise, at rates prescribed for share transfers.
Do NRIs need approval to buy Indian shares?
Most sectors allow purchase under the automatic route, subject to pricing guidelines and reporting in FC-TRS. Some sectors need government approval.
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