Legal Question in Business Law in India

11.01.2017

Dear Sir / Madam,

The seller company A sells its own shares to the buyer company B; and the shares of company A's subsidiaries are sold to the subsidiary companies of buyer B. If the Special Purpose Agreement (SPA) covers both the transactions, the need for another SPA between A and B is dispensed with. If the SPA is between the seller A's company including it's subsidiaries and the buyer B's company including it's subsidiaries, another SPA is not required to sell shares of A's subsidiaries in India..

Regards,

The two subsidiaries selling the shares are separate and distinct legal identities and I presume that each of the buyers will be a separate legal entity. Therefore, a common parentage does not impact the independent contract between a buyer and the seller and the contract/SPA must be prepared for each buyer and seller or at the minimum, one seller and the buyers from such seller ensuring that the rights and obligations of each buyer and seller are clearly and distinctly spelt out. In the event of any issues on enforcement, please keep in mind that all parties to an SPA may have to become proper and necessary party to any legal action. Therefore, in case there are two sellers and a group of buyers, then, I recommend, at the minimum, two SPAs with the rights and obligations clearly, distinctly and precisely spelt out. However, a more precise review of facts is necessary for a proper view.