This template covers a secondary sale of existing shares from a selling shareholder to a purchaser. It is not a subscription — no new shares are issued and no money reaches the company. Execute on stamp paper of the value prescribed in the State of execution; the share transfer form itself is separately stampable.
Share Purchase Agreement
Secondary transfer of shares in [COMPANY NAME]
This template covers a secondary sale of existing shares from a selling shareholder to a purchaser. It is not a subscription — no new shares are issued and no money reaches the company. Execute on stamp paper of the value prescribed in the State of execution; the share transfer form itself is separately stampable.
THIS SHARE PURCHASE AGREEMENT is made at [PLACE] on [DATE]
BY AND AMONG:
(1)[SELLER NAME], [particulars, PAN and residential status for tax purposes] (the "Seller");
(2)[PURCHASER NAME], [particulars, PAN and residential status] (the "Purchaser"); and
(3)[COMPANY NAME], a company incorporated under the Companies Act, 2013, CIN [CIN], registered office at [ADDRESS] (the "Company"), joining as a confirming party.
Recitals
A.The Company carries on the business of [DESCRIBE] (the "Business").
B.The Seller is the registered and beneficial owner of [NUMBER] [equity shares / compulsorily convertible preference shares] of the Company of face value ₹ [FACE VALUE] each, representing [PERCENTAGE] per cent of its share capital on a Fully Diluted Basis.
C.The Seller wishes to sell and the Purchaser wishes to purchase the Sale Shares on the terms of this Agreement.
D.The Company joins as a confirming party to record its consent, to waive any restriction on transfer in its articles of association to the extent necessary, and to give the undertakings in Clause 8.
NOW THEREFORE the Parties agree as follows:
1. Definitions
1.1In this Agreement:
"Completion" means completion of the sale and purchase in accordance with Clause 4.
"Consideration" means the aggregate amount payable under Clause 3.1.
"Encumbrance" means any mortgage, charge, pledge, lien, hypothecation, security interest, option, right of pre-emption, trust, or any other agreement having a similar effect.
"Escrow Agent" means [NAME], appointed under the escrow agreement in the form of Schedule 4.
"Escrow Amount" means ₹ [AMOUNT], being [PERCENTAGE] per cent of the Consideration.
"Long Stop Date" means [DATE].
"Sale Shares" means the [NUMBER] [equity shares / CCPS] described in Recital B, together with all rights attaching to them, including the right to any dividend declared but unpaid.
"Warranties" means the warranties in Schedule 2.
2. Sale and Purchase
2.1The Seller shall sell with full title guarantee, and the Purchaser shall purchase, the Sale Shares free from all Encumbrances and together with all rights attaching to them as at the Completion Date.
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These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
The consideration goes to the seller, not to the company. The company is a confirming party because it must register the transfer and because the purchaser wants comfort on the register and the absence of encumbrances — not because it receives anything. Founders sometimes conflate the two in the same round; keep the documents separate and the money flows clear.
Where the seller is a non-resident, the purchaser is obliged to withhold tax on the sums paid and is personally liable for any shortfall, together with interest and penalty, irrespective of whether the seller ultimately pays. This is the single largest practical exposure in a cross-border secondary. Clauses 3.3, 3.4 and 7.1 allocate it, but allocation is not protection if the seller has left the jurisdiction — which is why a holdback or escrow is usual. Note also that the withholding provisions were consolidated into a single section of the Income-tax Act, 2025 with effect from 1 April 2026; quote the current section on the challan, not the old 194-series or 195 numbering.
A non-resident seller should apply for a certificate authorising deduction at a lower rate well before signing. Applications take weeks. Without one, the purchaser will withhold at the full rate and the seller carries the cash-flow cost until it files a return and claims a refund. Build the timeline into the conditions precedent.
Where a resident sells to a non-resident, the price may not be below fair market value. Where a non-resident sells to a resident, the price may not be above fair market value. The floor and the ceiling run in opposite directions and a single valuation certificate serves both. The resident party to the transfer files Form FC-TRS with its authorised dealer bank within the prescribed period; the filing obligation does not sit with the non-resident.
The transfer deed must be in Form SH-4, executed by both transferor and transferee, and stamped before execution. Duty on the transfer of securities is charged under the Indian Stamp Act, 1899 as amended, collected through the depository or registrar where the shares are dematerialised, and by affixing stamps where they are physical. The deed must be delivered to the company within sixty days of execution. An unstamped or late-delivered SH-4 is a common and entirely avoidable defect.
Almost every private company’s articles and shareholders’ agreement contain a right of first refusal and a tag-along. A transfer made without waiving them is voidable and the company may refuse to register it. Collect the written waivers first; they are the condition precedent most likely to delay completion because they depend on people who are not in the room.
A departing founder selling control gives business warranties. A financial investor selling a minority stake gives title and capacity warranties only, and should refuse the rest — it has no ability to verify the business and no continuing involvement. Clause 6.2 flags the choice. Do not let a Part B warranty set drift into a minority secondary by inertia.
Section 27 of the Indian Contract Act, 1872 voids restraints of trade, with a statutory exception permitting a reasonable restraint on a person who sells the goodwill of a business. That exception can support a non-compete where the seller is genuinely selling a business with its goodwill, within a specified local area and for a reasonable period. It does not support a non-compete on a simple sale of shares by a departing shareholder. Clause 8.4 therefore imposes confidentiality and non-solicitation only; take advice before adding more.
Eighteen months and ten to fifteen per cent of the consideration is a common starting point. The alternative — relying on a personal covenant from a seller who has already been paid and may have emigrated — is not really an alternative. If the seller resists an escrow, a staged payment achieves much the same result.
Legal title passes on registration in the register of members, not on execution of the transfer deed. Clause 4.5 and Clause 8.2 make the company do this at completion and evidence it within seven business days. Purchasers who accept a promise to register later frequently find themselves chasing it for months.
A departing founder or shareholder should give a release. Schedule 6 requires preserved claims to be listed expressly, including a statement that there are none. A release that is silent on preserved claims is the one that produces litigation about unpaid salary six months later.
Reflects Indian law current as of {{DATE OF USE}}. Withholding rates, exchange-control reporting and stamp duty change frequently — confirm the position at the time of the transaction and have the agreement settled by counsel.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, company secretary, or chartered accountant as relevant) before you rely on it.