In today’s fast-paced business environment, mergers, acquisitions, and investments are common occurrences, especially for startups and mid-size businesses. However, the legality and enforceability of these transactions hinge upon one powerful document — the Share Purchase Agreement (SPA).


Whether you're a founder selling part of your equity or a private investor acquiring a stake, this legal contract ensures that the deal is secure, compliant, and risk-proof. Yet, countless entrepreneurs make the mistake of using templated agreements or skipping expert guidance. This is where the role of a seasoned corporate lawyer becomes crucial. Let’s explore how to legally structure an SPA in India and what legal safeguards you must have in place.


Unlocking the Essentials of a Share Purchase Agreement


A Share Purchase Agreement (SPA) is one of the most critical legal documents in the lifecycle of a business transaction. Whether you're acquiring a company, transferring ownership, onboarding investors, or executing a private equity deal, the SPA sets the groundwork for how the transfer of shares takes place — legally, financially, and operationally. It defines the terms of sale, obligations of the buyer and seller, representations and warranties, and post-transaction responsibilities.

In India, where regulatory compliance spans the Companies Act, FEMA, SEBI norms, and various state-specific rules, structuring an SPA without legal supervision can lead to disputes, delays, and hefty penalties. Hence, the expertise of a seasoned corporate lawyer or SPA legal advisor is not a luxury — it’s a business necessity.


What is a Share Purchase Agreement (SPA)?


A Share Purchase Agreement (SPA) is a legal contract that outlines the terms and conditions under which shares of a company are bought and sold. It serves as the blueprint for transferring ownership and details critical aspects like pricing, payment methods, and post-transaction representations. In India, SPAs are instrumental in both mergers and acquisitions (M&A) and private investments.

Understanding the nuances of an SPA is essential, as it dictates the responsibilities of both the buyer and seller. Failing to accurately define these responsibilities can lead to disputes and financial loss. In terms of legal documentation for M&A, an SPA must comply with regulations from various authorities, including the Securities and Exchange Board of India (SEBI) and the Companies Act.

A Share Purchase Agreement (SPA) is a legally binding contract between a seller and a buyer wherein the seller agrees to sell a specified number of shares in a company to the buyer at a defined price and on particular terms.

It governs:

  • How the shares are transferred

  • What warranties and representations are made

  • Payment terms and conditions

  • Rights of the buyer post-acquisition

In India, SPAs are common in private equity deals, mergers and acquisitions, venture capital investments, and corporate restructuring.

A poorly structured SPA can lead to disputes, financial losses, or even criminal liabilities. Hence, engaging a corporate law expert or a private equity law firm is not optional—it’s a necessity.


Key Clauses to Include in a Share Purchase Agreement


Crafting a robust Share Purchase Agreement involves including several essential clauses that protect the interests of both parties.

A standard SPA in India should be tailored to the specific deal type and jurisdiction. However, the following clauses are universally critical:


1. Consideration Clause


This clause clearly defines how much the buyer is paying for the shares and in what form (cash, equity swap, etc.). It should also specify the payment schedule, escrow arrangements, and mode of payment.


2. Representations and Warranties


Both parties declare that certain facts about the company and transaction are true.
Example: The seller warrants that there are no outstanding legal claims against the company.

These warranties protect the buyer against unknown risks, especially those discovered post-deal.


3. Conditions Precedent (CP)


These are the obligations that both parties must fulfill before the transaction is completed.

Common CPs include:

  • Regulatory approvals (RBI/FEMA in case of foreign investment)

  • Tax clearances

  • Resignation of existing directors


4. Indemnity Clause


This protects one party (usually the buyer) from losses incurred due to the breach of warranties by the other party.

A SPA lawyer in India will ensure the indemnity scope is well-balanced, time-bound, and clearly quantified.


5. Non-compete and Confidentiality


To prevent the seller from starting a competing business or sharing sensitive data post-exit. Often paired with a Business Confidentiality Agreement, this clause is essential for preserving IP, client relationships, and goodwill.

Consideration and Payment Terms: Specify how the payment will be made—either as a lump sum or in installments—and detail the method of payment. Including a breakdown of the total consideration, including any contingent adjustments, provides clarity and avoids future disputes.

In addition to indemnity and payment clauses, you should also consider including conditions precedent, representations, and warranties, as well as confidentiality clauses to protect sensitive business information. Upholding a business confidentiality agreement is pivotal in securing interests during negotiations.


Legal Risks of Poorly Drafted SPAs


One significant aspect of drafting SPAs is understanding the legal risks associated with inadequately prepared documents. Poorly structured clauses may result in ambiguity, leading to misinterpretations or disputes post-transaction.

Engaging with a qualified corporate lawyer ensures that an SPA meets all legal requirements and minimizes risk. Issues that may arise from an insufficient SPA include liability for unreported debts or liabilities and failure to meet regulatory obligations, which may even lead to litigation down the line. This emphasizes the necessity of hiring a skilled dispute litigation lawyer who can assess and mitigate potential risks upfront.

Many founders rely on generic online templates or ignore the fine print in SPAs, exposing themselves to several risks:


Undefined Consideration Terms


Lack of clarity on payment stages can cause disputes or fund withholding.


Missing Dispute Resolution Mechanism

Without a defined jurisdiction or arbitration clause, enforcing the SPA can take years.


Weak Warranties


Insufficient warranties can lead to litigation, especially if post-deal liabilities or tax defaults surface.


Data Privacy Breaches


Without a clear data privacy advisory service, sharing company databases or client information can violate Indian IT laws or GDPR (in case of foreign entities).

Consulting a dispute litigation lawyer or asset recovery lawyer can become necessary post-facto, something that could have been avoided with sound legal vetting.


The Role of a Corporate Lawyer in Negotiation and Vetting


The expertise of a corporate lawyer is invaluable when it comes to structuring an SPA. A corporate law expert will assist in negotiating terms and ensuring that the agreement adheres to local and national legal frameworks.

Additionally, they will review all aspects of the SPA, offering insights on clauses such as conditions precedent and representations. With a legal professional by your side, the likelihood of overlooking critical details is drastically reduced, providing peace of mind in your investment decisions.

If you’re searching for corporate lawyers near you, consider looking for local firms specializing in SPAs, mergers, and acquisitions. Certain geographical areas like Delhi, Mumbai, Bangalore, and Cochin have renowned SPA lawyers who can assist in tailored legal advice.

A well-versed corporate lawyer adds tremendous value to your SPA drafting process:


Due Diligence


The lawyer verifies company books, liabilities, pending litigation, and more, to ensure full disclosure to the buyer.


Drafting and Customization


Unlike standard templates, a legal expert will customize clauses based on industry, region, and type of investment.


Negotiation Support


They help protect your rights while still making the deal attractive to investors.


Risk Management


From data privacy to exit rights, lawyers safeguard you from post-deal liabilities.

Whether you search for corporate lawyers near me, attorneys near me, or the best advocate in high court, ensure they have expertise in M&A and corporate documentation.


Why Legal Vetting Matters


A SaaS startup in Cochin Infopark raised ₹2 Cr through a private investor. However, the SPA lacked:

  • Specific indemnity clauses

  • Post-funding compliance obligations

  • A clause to settle disputes under Cochin jurisdiction

Two years later, a tax issue emerged from pre-funding periods, and the investor sued for breach. The founders had to hire a dispute litigation lawyer and eventually settle for ₹15 lakhs out of court. Had they engaged a SPA lawyer this could have been avoided


Checklist for Indian Companies & Startups Before Signing a Share Purchase Agreement

Before signing an SPA, both parties should have a thorough checklist to ensure that the agreement is legally sound and comprehensive. Here are essential items to include:


Essential SPA Compliance Checklist for Businesses in Kerala

Before entering into a Share Purchase Agreement (SPA), companies and startups in Kerala must build a strong legal and financial foundation. Whether you’re based in Kochi’s tech corridors, Trivandrum’s startup ecosystem, Calicut’s traditional business hubs, or Thrissur’s growing enterprises, this checklist will help you avoid regulatory pitfalls and ensure smooth execution of your SPA.


Complete Financial, Legal, and Tax Due Diligence


Start with a thorough review of the target company’s financial statements, past audit reports, income tax filings, GST returns, and any undisclosed liabilities. Legal due diligence should cover corporate registrations, legal disputes, compliance history, and IP ownership. In Kerala, where many family-owned or closely-held companies operate, due diligence also reveals hidden operational risks or informal arrangements that may affect deal execution.


Obtain Necessary Corporate Approvals


Before executing an SPA, obtain official resolutions from the Board of Directors and, where required, shareholders. This step is legally mandated under the Companies Act, 2013. For companies registered in Ernakulam ROC jurisdiction (which covers most of Kerala), ensure that shareholder meeting minutes and board resolutions are properly drafted and recorded. This safeguards the transaction from future internal disputes.


Regularise ROC Filings and Company Documentation


In Kerala, many SMEs overlook regular compliance filings with the Registrar of Companies (ROC). Make sure all statutory forms like MGT-7 (Annual Return), AOC-4 (Financials), DIR-3 KYC, and updated share capital details are filed and approved. Delays or discrepancies in ROC filings can stall or invalidate an SPA transaction. It is best to consult a corporate legal advisor to bring these up to date before due diligence begins.


Review Shareholder Agreements and Voting Rights


Any existing Shareholders’ Agreement (SHA) or Voting Trust Agreement should be carefully reviewed for clauses that restrict or condition the transfer of shares. These may include:

  • Pre-emptive rights

  • Right of First Refusal (ROFR)

  • Drag-along or tag-along rights

This is especially relevant in Kerala-based startups or LLPs where investor clauses may have been introduced during early-stage funding. Ensuring all stakeholders agree to the proposed transfer terms helps avoid future legal challenges.


Strengthen Confidentiality & IP Protection Clauses


When you're sharing sensitive business information with a potential buyer or investor, it's vital to secure it through solid Non-Disclosure Agreements (NDAs) and Confidentiality Clauses within the SPA. Businesses in Kerala operating in sectors like IT services, logistics, Ayurveda, and manufacturing must protect proprietary data, client lists, and trade secrets. A lawyer familiar with business confidentiality agreements in India can ensure your assets are shielded even if the deal doesn’t go through.


Outline Clear Exit Mechanisms for Investors or Buyers


Your SPA should define what happens after the deal, especially in case of disagreements or exit events. Include clauses like:

  • Drag-along rights (majority shareholders can force minority to sell)

  • Tag-along rights (minority shareholders can sell if the majority does)

  • Put and call options to allow future exits at pre-agreed terms

This provides clarity to both parties and avoids disputes. In Kerala, many private limited companies are closely held — making these clauses critical for investor confidence and regulatory clarity.


Clarify the Post-Investment Capital Structure


Post-transaction, the company's ownership pattern should be transparent to all parties. This includes:

  • % stake of each shareholder

  • ESOP allocations (if any)

  • Impact of convertible instruments (e.g., CCDs, SAFE notes)

Businesses in Kochi and Trivandrum, where startup funding is rising, must clearly lay out capital tables and waterfall structures to avoid dilution-related confusion post-deal.


Take advice from SPA Legal Expert


Finally, consult an experienced SPA lawyer in Kerala (if you are residing in Kerala)— especially someone well-versed in corporate law, M&A documentation, and regional regulatory nuances. A lawyer based in Kochi can ensure that your SPA aligns with the Companies Act, FEMA regulations, RBI guidelines, and local tax laws. Having a local legal partner also helps in liaising with regional ROC offices and handling physical documentation if required.


Conclusion: Your Path Forward with Share Purchase Agreements


A Share Purchase Agreement is more than a piece of paper—it’s the legal foundation of your investment or exit journey. Whether you're an entrepreneur, a private investor, or a CFO managing M&A, getting the SPA right is non-negotiable.

Back your next deal with experienced legal support from a corporate law expert or a private equity law firm. A well-drafted SPA safeguards your interest, ensures compliance, and creates a smooth transaction for all parties.