SHARE PURCHASE AGREEMENT

 SPA i.e. Share Purchase Agreement means the legal contract or agreement between the shareholders and the entity at the time of share purchase of the company. This consists of details like investment, allotment, lock in period, terms of investments etc. 

In this agreement, all the relevant details regarding the purchase of shares are mentioned such as number of shares, face value, premium thereon, total consideration, rights and obligation etc. Then the indemnification is filed by both the parties i.e. the buyers and the seller. 

Then the executed purchase transaction will be submitted to the company for the transfer of the name of the shareholders in the company books. 

NEED AND PROCESS OF SHARE PURCHASE AGREEMENT

As the buyer have invested their hard earned money in the shares of the entity they must need to protect and secure themselves from any scan of fraud or misconduct against them so as to give a legalised and genuine effect to the same. The buyers and share allottee or seller must enter into an agreement to avoid any disputable situation which might affect the organisation in future. 

Below is the process:

1. Decide the entity of which the share needs to be purchased.
2. Search for the prospective shareholder who is willing to sell his/her shares.
3. General details of the company and buyer-seller such as name, address, date of agreement, rate of purchase, number of securities etc.
4. Defining the terms mentioned in the SPA, such as the reference to the entity, will be named as a company, the purchase will be the share purchases who is willing and has agreed to purchase the shares of the company.
5. About the conditions post and pre-execution of the purchase transaction such as seller warranties, undertaking, purchase warranties etc.
6. The indemnification by both buyer and seller about the trueness of the facts.
7. After some other due formalities at the end, the purchased shares got transfers in the demat of the purchaser.

MERITS

1. The seller of the securities will have no liability pursuant in the shares sale to the purchaser, which now become due to the new buyer.
2. No involvement of any kind of third party.

DEMERITS

1. The major demerit of this agreement from the buyer perspective is that the last outstanding use may sometimes also transfer in the buyer's name resulting in unnecessary charges.
2. Sometimes it is seen that there are no shared purchase contracts between the share purchaser and seller of the company. In this scenario the shares remain in the name of the seller which creates inauthentic obligations and rights.

SHARE PURCHASE VS SHARE TRANSFER AGREEMENT 

• The term share purchase agreement is with regards to the agreement b/w the buyer of shared and the seller of shares regarding the terms and execution of such terms and in which manner, on the other hand, the share transfer is between the shares seller and the entity to transfer such shares for which the SPA was entered upon.
• Share transfer agreement included shares purchase but the SPA does not include a share transfer.
• The share transfer contract is the succeeding step taken after the SPA execution to transfer such shares in the name of purchaser.
• The terms in the STA are binding and have legal obligation but on the other hand, the SPA is considered as less obligatory.
• After execution of the share transfer contract, the obligations upon the seller come to an end, but on the execution of the share purchase contract, the seller still is liable, the seller is still a shareholder.
• Share transfer also acts as an intimation to entities regarding the shares sale by the existing shareholders.