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What is the Share Purchase Agreement in Case of NBFC?

Narendra Kumar

| Updated: Sep 20, 2018 | Category: Legal Agreements, NBFC

Share Purchase Agreement in Case of NBFC

What do we mean by the Share Purchase Agreement in India?

Share Purchase Agreement in case of NBFC formal agreement that is signed between the buyers and sellers to affect the sale and purchase of the shares. They are like other formal contracts that are made between the parties in any formal transfer of thing in the course of business.

In layman language, a Share Purchase Agreement (SPA) is an agreement that is signed between two parties the seller and the buyer at a fixed purchasing Price. The seller agrees to sell the mentioned number of shares at a specific price to the buyer. The main goal of the share purchase document is to demonstrate that the terms of the agreement were commonly settled by both the seller and the buyer. Such an agreement specifies the number and the number of shares to be sold, the conditions precedent, and the agreements by the two parties. The shares will then be dispensed after this Share Purchase Agreement has been signed.

What is the Share Purchase Agreement in case of NBFC?

Now, the share purchase agreement in case of  NBFC means an agreement generated between the two or three parties affecting the transfer of shares. The Share Purchase agreement defines the terms and conditions that are to be followed by both the parties engaged the contract of transfer of the share in case of NBFC.

You must have the NBFC Registration to conduct any activity like transfer of shares. Without having NBFC Registration in India you cannot be a party to any contracts or agreement for a share of transfer. If the buyers are like the shell companies who are created only for the purpose of effecting Share Purchase Agreement which lacks financial or administrative credibility then the head of company will act as a Guarantor to ensure payment or compensation in case of fraud or non- payment.

Generally, the securities of the company are free transferrable though there is maybe a certain restriction that is imposed on the transferring of shares of the Private Company as provided in their articles. According to the Section 56 of the Companies act 2013, any company who is registered under Companies act 2013 can transfer the shares or other securities only when a proper instrument of transfer of shares is filed in the prescribed Form SH- 4.

The form SH-4 shall be filed to registrar within the 6o days from the date of execution of shares transfer agreement along with Share Purchase Agreement and share certificate relating to the securities.

Now, NBFC within one month from the date of receipt of the Share Purchase Agreement send share transfer certificate to the party. NBFC registered with RBI has much compliance that asked to be followed at the time of any transfer of shares.

Some Definition under Share Purchase Agreement in case of NBFC

  • Act – act means the Company Act 2013 which is amended from time to time
  • Agreement – means this Share Purchase Agreement together with its annexure and schedules, as may be amended from time to time in accordance with the provisions contained herein
  • Share – “Equity Shares” means the issued and fully paid up equity shares of the Company, having a face value of Rs.[_____] each;
  • Purchasing Price – means the aggregate sum required to be paid by the Purchasers to the Sellers for the Purchase Shares;
  • Seller or Transferor – the person who sells or transfer the shares
  • Buyer or Transferee – the person who buys or transferred the shares later who hold the share certificate after the transfer

What are some Features of the Share Purchase Agreement?

The following are some of the features of the Share Purchase Agreement in India –

  1. Warranties or Representatives of the Buyer
  2. The formal obligation that is binding of the parties i.e. Covenants
  3. Condition Precedent – Obligations, permissions, and permits to be taken
  4. Protection Policies for sellers in case buyers default on payment
  5. Alternate Dispute Mechanism to be used in case any dispute arises
  6. Jurisdictions and General Clause which specifies what courts should be approached in case if legal disputes arising and Alternate Dispute Resolution mechanism is not working out.
  7. Where the notices are delivered in cases of legal disputes arises
  8. The process to be used after the shares are exchanged in case of NBFC
  9. Exchange of documents and other legal formalities to be completed after the transfer of shares
  10. Details on Exercise of Voting Rights

How We Can Help You?

Our team is backed by the professional lawyers who will contact you as soon as you contact us will explain you the whole process and will make the Share Purchase Agreement according to your requirement. It will hardly take 3 to 4days to serve you our best.

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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