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Share Purchase Agreement (SPA) in India

Q: Who is responsible for paying the stamp duty, the buyer or the seller?

The responsibility for paying stamp duty is usually negotiable. It can be borne by the buyer, seller, or both. This is typically agreed upon in the share purchase agreement. In the absence of an agreement, local laws may specify. It's crucial to clarify this in the SPA. This prevents disputes later on.

Q: What happens if one party breaks the promises in the SPA?

If a party breaches the SPA, the other party has legal recourse. The agreement's indemnification clauses usually kick in. The non-breaching party can claim damages. They might also seek specific performance. This means asking a court to compel the breaching party to fulfill their obligations. The governing law and dispute resolution clause will dictate the process.

Q: How long does the entire share purchase process take?

The duration of a share purchase varies. Simple transactions might take a few weeks. Complex deals can take several months. Factors include due diligence scope, negotiations, and regulatory approvals. The availability and cooperation of parties also influence timing. Efficient legal and financial advisors can expedite the process.

Q: Is a board resolution always necessary for an SPA?

Yes, a board resolution is almost always necessary. If a company is buying or selling shares, its board must approve. This ensures the transaction is officially authorized. It provides legal validity to the deal. Shareholders might also need to approve, depending on the company's articles.

Q: What is the difference between physical and demat share transfers in an SPA?

For physical shares, the seller hands over physical share certificates. The buyer then submits these to the company for registration. This involves updating the company's register of members. For demat shares (dematerialized shares), the process is electronic. Shares are held in an electronic account. The transfer occurs by debiting the seller's demat account. It credits the buyer's demat account. This is done through a Depository Participant (DP). Most modern share transfers happen in demat form. It is a faster and more secure process. Both types are covered in a share purchase agreement in India.

Q: Are Share Purchase Agreements legally binding?

Yes, once both parties sign the SPA, it becomes a legally binding document. This means both the buyer and the seller must follow the terms written in the agreement. If someone does not follow the terms, legal action can be taken.

Q: What is the role of due diligence in an SPA, and what happens if major problems are found?

Due diligence serves as a background check where the buyer reviews the company’s records, finances, and legal details to avoid hidden issues. If significant problems are uncovered, the buyer may cancel the deal or request changes to the terms, such as lowering the price or adding stronger warranties in the SPA.

Q: Can foreign investors enter into a Share Purchase Agreement in India?

Yes, foreign investors can enter into an SPA in India. But they must follow rules under the Foreign Exchange Management Act (FEMA). Certain sectors may have restrictions or limits on foreign ownership.

Q: Is notarization or registration of SPA required?

In most cases, notarization or registration is not needed for an SPA. However, stamp duty must be paid as per state rules. If the SPA involves large value or foreign parties, it's better to take legal advice.

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Trusted Reviews

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Frequently Asked Questions (FAQs)

Can I use a ready-made SPA template from the internet?

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Using a ready-made template is generally not advisable. Each share purchase is unique. Online templates might not cover specific legal nuances. They may not comply with Indian laws. They often lack necessary clauses for protection. It's best to consult a legal expert. A customized agreement offers better security. This helps avoid future disputes.

Who is responsible for paying the stamp duty, the buyer or the seller?

What happens if one party breaks the promises in the SPA?

How long does the entire share purchase process take?

Is a board resolution always necessary for an SPA?

What is the difference between physical and demat share transfers in an SPA?

Are Share Purchase Agreements legally binding?

What is the role of due diligence in an SPA, and what happens if major problems are found?

Can foreign investors enter into a Share Purchase Agreement in India?

Is notarization or registration of SPA required?

Can the terms in an SPA be changed after signing?

What are “conditions precedent” in an SPA?

Why Choose RegisterKaro for Drafting a Share Purchase Agreement?

Navigating a share purchase can be complex. Legal expertise is essential. RegisterKaro offers comprehensive support:

Expert Legal Drafting Tailored for You: Every share purchase is unique. A generic template might not cover specific needs. We provide personalized legal drafting. Our experts understand Indian corporate law. They ensure your share purchase agreement format is robust.
Comprehensive Due Diligence Support: Due diligence is a critical phase. It requires meticulous attention to detail. We assist with this vital process. We help buyers identify potential issues, such as financial, legal, and operational ones.
End-to-End Process Management: The entire share purchase process involves many steps. From LOI to post-closing formalities, it can be overwhelming. We offer end-to-end management.

Why Choose RegisterKaro for Drafting a Share Purchase Agreement?

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