Buying a Company or Buying a Business: Share Purchase and Slump Sale Compared for Indian Deals
This article compares the two principal ways of acquiring a business in India, a purchase of the target's shares under a share purchase agreement (SPA) and a purchase of the business itself under a business transfer agreement (BTA), usually structured as a slump sale.
The choice drives which liabilities the buyer takes, what must be transferred at closing, how the transaction is taxed and which approvals are needed. Advisers are commonly asked to settle the structure before the term sheet is fixed, and changing it later usually means redoing diligence and documents.
Where the buyer wants the whole company
Position under an SPA
The buyer acquires shares from the existing shareholders. The company itself does not change: it keeps its assets, contracts, licences, employees and liabilities. Only ownership moves. A buyer therefore inherits the company's history, known and unknown, unless it is protected by the contract.
A typical SPA records the number and class of shares, the price, the payment mechanism and timeline, conditions precedent, closing actions, representations and warranties, indemnities, post-closing obligations, and governing law and dispute resolution.
Pricing and protection
The price may be fixed, set on a locked-box basis, subject to adjustment after closing, deferred, or structured in another agreed manner. Because history passes with the shares, protection is built into the agreement through warranties, specific and general indemnities, price adjustment, escrow, deferred consideration, liability caps and survival periods.
Closing
Closing normally involves payment, share transfer and delivery of transfer documents, a change of directors and authorised signatories, corporate actions recording the new shareholder, and updates to statutory registers.