# Share Acquisition — Buying a Company

> Buying a company's shares transfers ownership of the whole entity — assets, contracts and liabilities. The seller pays capital gains on the shares, with unlisted shares deemed sold at least at fair market value (Section 50CA); the buyer can be taxed if it pays less than fair market value (Section 56(2)(x)). A change of more than 49% in shareholding of a closely held company usually wipes out its carried-forward losses (Section 79, with startup relief), and transfers involving non-residents follow FEMA pricing and FC-TRS reporting.

Practice: Mergers, Acquisitions & Restructuring — https://www.industax.com/services/mergers-acquisitions/

Because liabilities come with the company, due diligence and strong warranties and indemnities in the share purchase agreement are essential. Escrows or deferred consideration protect the buyer against undisclosed tax and compliance exposures.

We structure the deal, run financial and tax diligence, value the shares, and complete the tax, FEMA and ROC formalities after signing.

## Key facts

| Item | Detail |
| --- | --- |
| Seller tax | Capital gains; FMV floor for unlisted shares (50CA) |
| Buyer tax | Section 56(2)(x) if price below FMV |
| Losses | Lost on > 49% change for closely held companies (Section 79) |
| Non-residents | FEMA pricing; FC-TRS within 60 days |
| Competition law | CCI approval above thresholds, including deal-value test |

## Who needs this

- Companies acquiring competitors or suppliers
- Investors buying out founders
- Promoters selling their company

## What's included

- Deal structuring
- Due diligence
- Valuation
- Closing compliance

## Documents

- Target financials and records
- Cap table
- Material contracts

## Process

1. **Structure** — Share vs asset deal and tax plan.
2. **Diligence** — Risks found and priced.
3. **Close** — SPA signed; transfers and filings done.

## FAQs

### Share purchase or asset purchase — which is better?

Share purchases keep contracts and licences intact but carry all liabilities; asset or business purchases let buyers pick what they take but may need fresh licences and consents. Tax costs also differ for each side.

### Will the target's tax losses survive?

For closely held companies, a change in more than 49% of voting power usually ends the carry-forward of business losses, with a relief for eligible startups if all original shareholders continue.

### Does a small acquisition need CCI approval?

Only if the parties or the deal cross the Competition Act thresholds, including the deal-value threshold. Many small deals are exempt.

## Official sources

- Ministry of Corporate Affairs: https://www.mca.gov.in/
- incometaxindia.gov.in: https://www.incometaxindia.gov.in/
- Competition Commission of India: https://www.cci.gov.in/

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Canonical page: https://www.industax.com/services/mergers-acquisitions/share-acquisition
Publisher: Indus Tax — CA-led tax and compliance firm (https://www.industax.com). Contact: info@industax.com, 9059139258.
This is general information, not advice for your specific facts.