Transaction Agreement Drafting & Review | Nainit Savla & Associates

Transaction Agreements

Q: What is the difference between an SHA and an SPA?

An SHA governs the ongoing post-investment relationship between shareholders — board rights, governance, exit mechanisms. An SPA governs the specific transaction of buying and selling shares — price, warranties, indemnification. Both are required; the SPA governs the deal, the SHA governs the post-deal relationship.

Q: What are representations and warranties and why are they important?

Statements of fact made by the seller in the SPA confirming that specific things about the company are true. If a warranty proves false, the buyer has a warranty claim for loss suffered — R&Ws are the primary legal protection against undisclosed business problems.

Q: What is a disclosure letter and why does it matter for the seller?

A disclosure letter lists known exceptions to the warranties — disclosing known issues protects the seller from warranty liability for those issues. An inadequate disclosure letter leaves the seller exposed to claims for issues they knew about but did not properly disclose.

Q: What is a drag-along right and how does it work?

A drag-along allows a majority shareholder to require all other shareholders to sell their shares in a company-wide sale at the same price per share — enabling a full exit without minority shareholder blocking. Essential for most strategic acquirers requiring 100% ownership.

Q: What is a tag-along right and how does it protect minority shareholders?

A tag-along entitles minority shareholders to participate in any majority shareholder sale at the same price per share — preventing them from being left behind with a new majority shareholder they did not choose. A fundamental investor protection in PE and VC SHAs.

The definitive transaction documents are where the economic deal agreed between the parties is converted into legally binding obligations, protections, and recourse mechanisms. A well-drafted transaction agreement protects both parties, minimises ambiguity that leads to post-closing disputes, and ensures the deal reflects what was actually agreed during negotiations — not what one side assumed. Poorly drafted agreements — particularly on warranties, indemnities, earn-outs, and governance provisions — are a leading cause of post-transaction litigation and value destruction. Our transaction agreement advisory service covers the full suite of documents required for investment and M&A transactions in India.

Shareholders Agreement (SHA)

Comprehensive SHA governing post-investment shareholder rights — board composition, reserved matters, information rights, anti-dilution, pre-emption rights, tag-along, drag-along, and exit provisions for PE, VC, and strategic investments.

Share Purchase Agreement (SPA)

SPA for secondary share transactions — representations and warranties, conditions precedent, closing mechanics, post-closing adjustments, warranty claims procedure, indemnification, and limitation of liability provisions.

Share Subscription and Purchase Agreement (SSPA)

Combined subscription and purchase agreement for transactions involving both primary issuance of new shares and secondary purchase of existing shares — common in PE investment transactions in India.

Term Sheet & Letter of Intent

Drafting and review of term sheets and letters of intent — ensuring the commercial terms are unambiguous, binding provisions are identified, exclusivity and confidentiality protections are adequate, and the term sheet is consistent with the intended final agreement.

Earn-Out & Deferred Consideration Agreements

Drafting of earn-out provisions — defining performance metrics, measurement period, calculation methodology, payment mechanics, accounting policies, and dispute resolution — to minimise the risk of post-closing earn-out disputes.

Disclosure Letter

Preparation of the disclosure letter against representations and warranties — ensuring all known exceptions to the warranties are properly disclosed to limit the seller's post-closing warranty liability for disclosed matters.

The Complete Transaction Document Suite

A complete investment or M&A transaction requires multiple interlinked documents that must be internally consistent with each other and with the commercial deal terms agreed in the term sheet. Our document drafting covers the complete suite — from the binding term sheet through to the closing deliverables — ensuring that every commercial point agreed in negotiations is captured precisely in the legal text, and that the documents work together as a coherent framework governing the parties' relationship post-closing.

Our transaction agreement service works alongside investment transaction advisory, M&A advisory, and investor due diligence to ensure that the documentation reflects all due diligence findings and deal-specific protections.

Transaction Documents We Draft and Review

Non-Disclosure Agreement (NDA) — before commencing due diligence or negotiations
Term Sheet / Letter of Intent (LOI) — non-binding commercial terms with binding exclusivity
Share Purchase Agreement (SPA) — for secondary share acquisitions
Share Subscription Agreement (SSA) — for primary issuance of new shares
Share Subscription and Purchase Agreement (SSPA) — combined primary and secondary
Shareholders Agreement (SHA) — post-closing governance and investor rights
Disclosure Letter — warrantor's disclosures against SPA representations and warranties
Earn-out agreement — deferred consideration mechanics and dispute resolution
Escrow agreement — holdback mechanics and release conditions
Management retention agreements — key employee lock-in post-closing

Frequently Asked Questions

What is the difference between an SHA and an SPA?

A Shareholders Agreement (SHA) is a governance document — it governs the ongoing relationship between shareholders after the investment or acquisition is completed. It covers board composition, voting rights, reserved matters requiring investor consent, pre-emption rights on future share transfers, tag-along and drag-along rights, exit mechanisms, and information rights. A Share Purchase Agreement (SPA) is a transactional document — it governs the specific transaction of selling and purchasing shares. It covers the commercial terms (price, payment, closing), the seller's representations and warranties about the company, conditions precedent to closing, and the indemnification framework for warranty breaches. Both are essential in most investment transactions — the SPA governs the transaction; the SHA governs the post-transaction relationship.

What are representations and warranties and why are they important?

Representations and warranties (R&Ws) are statements of fact made by the seller (and sometimes the company) in the SPA — confirming that specific things about the company are true as of the date of the agreement. They cover areas such as: the company's legal existence, its financial statements being accurate, no pending litigation or tax demands beyond what is disclosed, material contracts being valid and enforceable, and no material adverse change in the business. If a warranty proves to be false — i.e., the stated fact was not true — the buyer has a warranty claim against the seller for the loss suffered. R&Ws are the primary legal protection for buyers against undisclosed problems in the business.

What is a disclosure letter and why does it matter for the seller?

A disclosure letter is a document prepared by the seller alongside the SPA — it discloses specific facts that are exceptions to or qualifications of the representations and warranties being given. By disclosing a known issue in the disclosure letter, the seller protects themselves from warranty liability for that specific issue — because the buyer is deemed to have accepted the disclosed risk by proceeding to closing. An inadequate disclosure letter leaves the seller exposed to warranty claims for issues they knew about but did not properly disclose. Preparing the disclosure letter is one of the most legally consequential tasks in the sell-side process — it should be prepared with the same rigour as the SPA itself.

What is a drag-along right and how does it work?

A drag-along right allows a majority shareholder (or a specified threshold of shareholders, often the PE investor after meeting certain criteria) to require all other shareholders to sell their shares in a company-wide sale — even if the minority shareholders do not wish to sell. It is designed to enable a full exit of the company (100% sale to a buyer) without being blocked by a minority shareholder who refuses to participate. The drag-along typically requires the minority shareholder to receive the same price per share as the majority. It is one of the most commercially important provisions in the SHA — buyers typically require drag-along rights before agreeing to a transaction, since most strategic acquirers want 100% ownership rather than an investment with a minority shareholder.

What is a tag-along right and how does it protect minority shareholders?

A tag-along right (also called a co-sale right) entitles a minority shareholder to participate proportionately in any sale of shares by a majority shareholder — ensuring that if the majority shareholder finds a buyer willing to pay a premium price for their shares, the minority shareholder can sell their shares at the same price per share rather than being left behind with an unwanted new majority shareholder. Tag-along rights protect minority shareholders from being trapped in the company with a new controlling shareholder they did not choose. They are a fundamental investor protection provision in virtually all PE and VC SHAs — and are equally important for founder minority shareholders when a PE investor holds a majority stake.

Transaction Documents That Protect Your Interests

SHA, SPA, SSPA, earn-out agreements, and disclosure letters — transaction agreement advisory for investment and M&A transactions across India.

Talk to an Expert