What is the difference between a share purchase and an asset purchase?

In a share purchase the buyer acquires shares in the target company, which continues to hold its assets and liabilities, so historical liabilities generally remain within the company. In an asset purchase or slump sale the buyer acquires identified assets or a business undertaking, which can allow liabilities to be left behind, subject to statutory exceptions. The choice affects diligence scope, documentation, tax treatment and consents required.

What does legal due diligence cover in an Indian transaction?

Legal due diligence typically examines corporate records and capital structure, title to material assets, material contracts and their change of control provisions, regulatory licences and compliance, employment arrangements, intellectual property, litigation and contingent liabilities, and past corporate filings. The scope is agreed with reference to the transaction structure and to the risks that will be allocated in the documentation.

When does a merger require approval from the National Company Law Tribunal?

A scheme of merger, amalgamation or arrangement under Sections 230 to 232 of the Companies Act, 2013 requires the approval of the National Company Law Tribunal, following meetings of members and creditors as directed and notice to the specified regulatory authorities. Certain mergers between eligible companies may instead be undertaken under the fast track route in Section 233, which does not require Tribunal approval in the same manner.

When is a transaction notifiable to the Competition Commission of India?

The Competition Act, 2002 requires notification of combinations meeting the prescribed thresholds, which are based on assets and turnover of the parties and, in specified circumstances, on transaction value together with a local nexus requirement. Certain categories of transaction are exempt. Notifiable transactions may not be given effect to before clearance, and thresholds should be assessed against the position in force at the time of the transaction.

What triggers an open offer under the takeover regulations?

The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 require an acquirer to make an open offer to public shareholders on acquiring shares or voting rights beyond the specified thresholds, on further acquisition beyond the permitted creeping limits, or on acquiring control of a listed company. Exemptions are available in the circumstances set out in the regulations.

Can a foreign investor freely invest in an Indian company?

Foreign investment is permitted under the automatic route in many sectors, subject to sectoral caps and conditions, while other sectors require government approval. Investment from specified jurisdictions is subject to additional approval requirements. Pricing guidelines, permissible instruments and reporting obligations under the Foreign Exchange Management Act, 1999 apply in each case.

Are exit rights in a shareholders' agreement enforceable?

Exit and optionality arrangements involving non-resident investors are subject to the conditions applicable under the foreign exchange framework, including restrictions on assured returns. Enforceability also depends on how the provision is drafted, whether it is reflected in the articles of association, and on the applicable provisions of company law. Structuring at the drafting stage materially affects enforceability later.

What is unpublished price sensitive information?

Under the insider trading regulations, unpublished price sensitive information is information relating to a listed company or its securities, not generally available, which on becoming generally available is likely to materially affect the price of the securities. Persons in possession of such information are subject to restrictions on trading and communication, and listed companies are required to maintain the records prescribed by the regulations.

Corporate, M&A, Private Equity & Capital Markets

Corporate and transactional practice concerns the formation, governance, financing, acquisition and restructuring of companies, and the regulatory framework applicable to each. Sagar & Sagar Law Offices advises on mergers and acquisitions, joint ventures, private equity and venture capital investment, schemes of arrangement, and capital markets transactions governed by the Companies Act, 2013, the Foreign Exchange Management Act, 1999 and the regulations of the Securities and Exchange Board of India. Work covers structuring, due diligence, transaction documentation, regulatory approvals and completion, as well as ongoing corporate governance and compliance.

An Indian corporate transaction is generally governed by several frameworks at once. A share acquisition may engage the Companies Act, 2013 on issue and transfer, the Foreign Exchange Management Act, 1999 where an investor is non-resident, the Competition Act, 2002 where thresholds are met, and the regulations of the Securities and Exchange Board of India where a listed company is involved. Sequencing matters: an approval sought late, or a condition identified after signing, can change the economics of a deal or prevent completion.

The practice at Sagar & Sagar Law Offices covers transactions from structuring through to completion and beyond. Work includes legal due diligence, negotiation and drafting of transaction and shareholder documentation, obtaining regulatory approvals, and advising on post-completion governance and integration. The practice also covers standing corporate advisory work — board and governance matters, corporate compliance, and secretarial and structural changes — for companies that do not have a transaction in progress.

Scope of work

Corporate advisory and governance

Standing advisory work on the constitution, management and compliance of companies.

Advice on entity structuring and choice of vehicle, including companies and limited liability partnerships
Incorporation, conversion and changes to corporate structure
Drafting and amendment of memorandum and articles of association
Advice on board and shareholder meetings, resolutions and procedure
Advice on directors' duties, liabilities and related party transactions
Advice on corporate governance requirements under the Companies Act, 2013
Advice on corporate social responsibility obligations
Advice on registration and satisfaction of charges
Compliance reviews and remediation of past non-compliance
Advice on winding up and strike-off

Mergers, acquisitions and business transfers

Acquisition and disposal of companies, businesses and undertakings.

Structuring of acquisitions, including share purchase, asset purchase and slump sale
Legal due diligence on target entities and businesses
Drafting and negotiation of term sheets, memoranda of understanding and exclusivity arrangements
Drafting and negotiation of share purchase agreements and business transfer agreements
Advice on representations, warranties, indemnities and limitations of liability
Advice on conditions precedent, completion mechanics and post-completion adjustments
Advice on escrow, deferred consideration and earn-out arrangements
Advice on employee, contract and property transfer issues arising on transfer of a business
Advice on acquisition of distressed businesses, including through the resolution process under the Insolvency and Bankruptcy Code, 2016

Schemes of arrangement and corporate restructuring

Court and tribunal-supervised restructuring under the Companies Act, 2013.

Schemes of merger and amalgamation under Sections 230 to 232 of the Companies Act, 2013
Fast track mergers under Section 233 for eligible companies
Demergers, spin-offs and hive-offs
Reduction of share capital
Advice on cross-border merger arrangements
Representation before the National Company Law Tribunal in scheme proceedings
Advice on objections and representations from regulators and creditors in scheme proceedings
Internal group reorganisations and holding structure rationalisation

Joint ventures and shareholder arrangements

Arrangements governing the relationship between shareholders.

Structuring of joint ventures, including incorporated and contractual arrangements
Drafting and negotiation of joint venture agreements and shareholders' agreements
Advice on board composition, reserved matters and deadlock resolution
Advice on transfer restrictions, including rights of first refusal and first offer, tag along and drag along rights
Advice on non-compete and exclusivity provisions and their enforceability
Advice on funding obligations and consequences of failure to fund
Advice on exit mechanisms and termination of joint ventures
Advice on alignment of shareholders' agreements with the articles of association

Private equity, venture capital and fund work

Investment into companies and the vehicles through which investment is made.

Advice to investors and to investee companies on equity and structured investments
Drafting and negotiation of share subscription agreements and shareholders' agreements
Advice on instruments including compulsorily convertible preference shares and debentures
Advice on valuation, pricing and pricing guideline requirements for non-resident investment
Advice on liquidation preference, anti-dilution and preferential rights
Advice on exit rights and on the enforceability of optionality and exit arrangements
Advice on formation and structuring of alternative investment funds
Advice on fund documentation and on registration requirements with the Securities and Exchange Board of India
Legal due diligence for investors, including on regulatory and litigation exposure

Capital markets and securities regulation

Transactions and compliance involving listed companies and public issues.

Advice on public issues, rights issues, qualified institutions placements and offers for sale
Advice on preferential allotments and private placements
Advice on compliance under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018
Advice on continuous disclosure and governance obligations under the listing regulations
Advice on the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, including open offer triggers and exemptions
Advice on insider trading regulations, unpublished price sensitive information and structured digital databases
Advice on buy-back and delisting of securities
Representation in proceedings before the Securities and Exchange Board of India and the Securities Appellate Tribunal
Advice on debt securities and listed debt compliance

Foreign investment and cross-border transactions

Regulatory work where a party or the capital is non-resident.

Advice on entry routes, sectoral caps and conditions applicable to foreign direct investment
Advice on approval requirements applicable to investment from specified jurisdictions
Advice on pricing guidelines and permissible instruments for non-resident investment
Advice on reporting and filing obligations under the Foreign Exchange Management Act, 1999
Advice on overseas investment by Indian entities
Advice on India entry structures for foreign investors
Advice on external commercial borrowing and permissible debt funding

Competition and merger control

Assessment and clearance of transactions under competition law.

Assessment of notification requirements under the Competition Act, 2002
Advice on applicable thresholds and available exemptions
Preparation and filing of notifications with the Competition Commission of India
Advice on gun jumping risk and on permissible pre-completion conduct
Advice on remedies and modifications where required

Forums and authorities

Ministry of Corporate Affairs and the Registrar of Companies
National Company Law Tribunal and National Company Law Appellate Tribunal
Securities and Exchange Board of India
Securities Appellate Tribunal
Reserve Bank of India, in respect of foreign exchange and investment matters
Competition Commission of India
Regional Director and Official Liquidator, in scheme proceedings
Stock exchanges, in respect of listed company compliance
High Courts and the Supreme Court of India

Who we act for

Indian and foreign companies undertaking acquisitions and disposals
Private equity and venture capital investors
Founders, promoters and management teams
Family businesses and closely held companies
Listed companies and their boards
Investment funds and fund managers
Financial institutions participating in transactions
Joint venture partners
Acquirers of distressed businesses

How we approach this work

Structuring assessed against every applicable framework at the start.

Company law, foreign exchange, competition and securities regulation are considered together at the structuring stage, since a change to any one of them can alter the timetable or the price.

Due diligence directed at what affects the deal.

Diligence is conducted to identify issues that bear on value, on conditions to completion or on post-completion liability, rather than to produce an exhaustive catalogue.

Documentation drafted for the dispute it may produce.

Warranties, indemnities, transfer restrictions and exit rights are drafted with an eye to how they would be construed and enforced if the relationship breaks down.

Approvals sequenced against completion.

Regulatory filings and approvals are mapped against the conditions to completion so that the transaction timetable reflects the actual approval position.

Frequently asked questions

What is the difference between a share purchase and an asset purchase?: In a share purchase the buyer acquires shares in the target company, which continues to hold its assets and liabilities, so historical liabilities generally remain within the company. In an asset purchase or slump sale the buyer acquires identified assets or a business undertaking, which can allow liabilities to be left behind, subject to statutory exceptions. The choice affects diligence scope, documentation, tax treatment and consents required.
What does legal due diligence cover in an Indian transaction?: Legal due diligence typically examines corporate records and capital structure, title to material assets, material contracts and their change of control provisions, regulatory licences and compliance, employment arrangements, intellectual property, litigation and contingent liabilities, and past corporate filings. The scope is agreed with reference to the transaction structure and to the risks that will be allocated in the documentation.
When does a merger require approval from the National Company Law Tribunal?: A scheme of merger, amalgamation or arrangement under Sections 230 to 232 of the Companies Act, 2013 requires the approval of the National Company Law Tribunal, following meetings of members and creditors as directed and notice to the specified regulatory authorities. Certain mergers between eligible companies may instead be undertaken under the fast track route in Section 233, which does not require Tribunal approval in the same manner.
When is a transaction notifiable to the Competition Commission of India?: The Competition Act, 2002 requires notification of combinations meeting the prescribed thresholds, which are based on assets and turnover of the parties and, in specified circumstances, on transaction value together with a local nexus requirement. Certain categories of transaction are exempt. Notifiable transactions may not be given effect to before clearance, and thresholds should be assessed against the position in force at the time of the transaction.
What triggers an open offer under the takeover regulations?: The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 require an acquirer to make an open offer to public shareholders on acquiring shares or voting rights beyond the specified thresholds, on further acquisition beyond the permitted creeping limits, or on acquiring control of a listed company. Exemptions are available in the circumstances set out in the regulations.
Can a foreign investor freely invest in an Indian company?: Foreign investment is permitted under the automatic route in many sectors, subject to sectoral caps and conditions, while other sectors require government approval. Investment from specified jurisdictions is subject to additional approval requirements. Pricing guidelines, permissible instruments and reporting obligations under the Foreign Exchange Management Act, 1999 apply in each case.
Are exit rights in a shareholders' agreement enforceable?: Exit and optionality arrangements involving non-resident investors are subject to the conditions applicable under the foreign exchange framework, including restrictions on assured returns. Enforceability also depends on how the provision is drafted, whether it is reflected in the articles of association, and on the applicable provisions of company law. Structuring at the drafting stage materially affects enforceability later.
What is unpublished price sensitive information?: Under the insider trading regulations, unpublished price sensitive information is information relating to a listed company or its securities, not generally available, which on becoming generally available is likely to materially affect the price of the securities. Persons in possession of such information are subject to restrictions on trading and communication, and listed companies are required to maintain the records prescribed by the regulations.

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Overview