INDIA Law and Practice Contributed by: Kunal Chandra, Kabeer Mathur, Chinmay Bilgi, Sharnam Vaswani and Rajdeep Mukherjee, Trilegal
tion. Under the SEBI LODR, disclosures are required to be made as soon as reasonably possible and within the prescribed timeline of 30 minutes of the conclu - sion of the board meeting. In practice, stock exchange filings, press releases and investor communications are prepared in advance, often in parallel with final negotiations, to ensure that disclosures can be made immediately upon board approval without risking a breach of the prescribed timelines, while preserving confidentiality until disclo - sure. For unlisted companies, public announcements are generally synchronised with the execution of binding transaction documents or deal completion. 5.3 Scope of Due Diligence Due diligence in Indian M&A transactions typically covers legal, financial, tax and operational aspects of the target business, with the scope determined by transaction type and the scale of the target’s business. Legal due diligence exercises commonly examine corporate governance documents, material commer - cial contracts, licences, intellectual property rights, employment arrangements, statutory compliance and ongoing litigation. In addition to these general areas of review, legal diligences will also include certain India-specific ele - ments, depending on the nature of the transaction – these include: • in transactions involving foreign capital, analys - ing the target’s business to determine its sectoral classification under FEMA and related caps and conditions for foreign investment; • identification of regulatory approvals required for the transaction – which may include approvals from the CCI, the RBI, SEBI or sectoral regulators such as TRAI, IRDAI and NHB; • in transactions involving promoter-controlled busi - nesses – which represent a significant proportion of Indian M&A activity – a detailed review of related party transactions, intra-group arrangements and the terms of shared services; • title diligence on immovable property, which is a particularly important and often complex area in
Indian transactions, given the fragmented nature of land records across states and the prevalence of title disputes; and • diligence of both historical compliance under predecessor statutes as well as compliance readi - ness for the revisions to the regulatory framework, as necessitated by recent legislation such as the Labour Codes and the Digital Personal Data Pro - tection Act, 2023 and accompanying Rules. 5.4 Standstills or Exclusivity Standstill covenants and exclusivity provisions are both commonly included in transaction documenta - tion in Indian M&A deals, particularly in negotiated transactions involving private companies. Exclusivity arrangements are typically included in pre - liminary documents such as term sheets or letters of intent. These provisions restrict the target and seller from engaging with competing bidders for a specified period while the preferred acquirer conducts due dili - gence and negotiates definitive agreements. Exclusiv - ity periods in Indian M&A transactions typically range from 45 to 120 days depending on transaction com - plexity. In competitive auction processes, however, sellers may decline exclusivity until later stages of the transaction and may continue discussions with multi - ple potential acquirers until definitive agreements are executed. Break-up fees are uncommon and, where included, are difficult to enforce unless actual dam - ages are quantifiable. In the context of negotiated M&A transactions, stand - still obligations – sometimes referred to as interim covenants or conduct of business obligations – are typically incorporated into the definitive transaction agreements and govern the operation of the target between deal signing and completion of the transac - tion. Typical restrictions include limitations on issuing new securities, restructuring share capital, incurring material indebtedness, disposing of key assets or materially altering the nature of the business. 5.5 Definitive Agreements Definitive transaction agreements in Indian M&A trans - actions typically include share purchase agreements (SPAs), share subscription agreements (SSAs), busi - ness transfer agreements (BTAs) and shareholders’
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