A deal is a set of assumptions.
Diligence is where they get tested.

The first decision is what is actually being bought. In a share purchase the buyer takes the company with its entire history, so every liability the diligence did not reach travels with it. In a business transfer structured as a slump sale, the buyer takes an identified undertaking with the assets and liabilities specified, and the remainder stays behind. The choice is not cosmetic. It changes the tax treatment, including the capital gains computation under the Income-tax Act, 1961 for a slump sale, the stamp duty payable and on what, the third-party consents required to move contracts and licences, and how much of the protection package the buyer needs to negotiate. Sellers usually prefer a share sale because it is clean and final, and because the consideration reaches them in one place rather than in the company. Buyers usually prefer to leave the history behind. Most negotiations settle somewhere between the two once the tax numbers are on the table and both sides can see what the difference is worth.

Where a full combination is intended, a scheme of arrangement under Sections 230 to 232 of the Companies Act, 2013 achieves by court-sanctioned order what contract cannot: assets, liabilities, contracts and employees transfer by operation of law, on the terms of the sanctioned scheme and the tribunal order, without individual assignment. Contractual change-of-control provisions and regulatory consents may still be engaged. The price is process. A scheme runs before the National Company Law Tribunal with creditor and member meetings, notice to regulators, and a sanction hearing. A fast track route under Section 233 is available for categories defined by the Act and the rules made under it, and those categories should be checked against the rules in force. Cross-border mergers under Section 234 carry their own exchange control layer under the regulations made for the purpose.

Diligence runs as several exercises in parallel. Corporate and secretarial diligence traces share capital history from incorporation, checking that every allotment, transfer and buy-back was validly authorised and filed, because a defect in the chain of title to shares undermines everything built on top of it. Contractual diligence picks up change-of-control and assignment provisions, exclusivity, minimum commitments and termination rights. Litigation diligence covers pending and threatened matters, notices, and contingent exposures that have not yet been provided for. Tax, employment, intellectual property, real estate title, regulatory licensing, data protection and anti-bribery diligence each follow their own lines of enquiry. On a target that has raised money before, the corporate workstream carries its own difficulty, because early rounds tend to have been documented quickly and because a founder who has since left may not be available to explain what was agreed.

The findings then have to go somewhere. A diligence report that lists issues without translating them into deal consequences has done half the work.

Representations and warranties are statements of fact about the target given as at signing and usually repeated at completion. They divide into fundamental warranties on title, capacity and capitalisation, which a buyer cannot afford to compromise, and business warranties covering accounts, contracts, compliance, tax, employment and intellectual property. Negotiation happens through qualifiers rather than deletions: knowledge qualifiers limiting a warranty to what named individuals actually know, materiality qualifiers, and limits of time and scope. The disclosure letter then operates against the warranties, carving out what has been disclosed, and the standard of disclosure required for a carve-out to work is itself a negotiated point. A general reference to the contents of a data room and a fair and specific disclosure of a known problem are worlds apart in what they leave the buyer able to claim for, and that single definition often moves more risk than a week spent on the warranty schedule.

The indemnity provisions decide what a breach is worth. A de minimis threshold excludes small claims. A basket or aggregate threshold requires total claims to exceed a level before any are payable, and whether recovery then runs from the first rupee or only from the excess is a separate question that is easy to leave ambiguous. A cap limits total liability, and the cap for fundamental and tax warranties is negotiated separately from the cap for business warranties. Survival periods set how long claims may be brought, and business warranties typically survive for a shorter period than tax and fundamental warranties. Specific indemnities sit outside all of this, addressing identified diligence findings on a full-recovery basis, and sellers resist them for exactly that reason.

A remedy also has to be collectable.

The value of a warranty depends on the covenant strength of the party giving it.

Escrow, holdback of part of the consideration and deferred consideration all do the same job, and the negotiation is over amount and duration rather than principle.

Where approvals are needed, signing and completion separate, and the interval is governed by conditions precedent, interim covenants and a long stop date. Conditions typically include competition clearance, foreign investment approval where the government route applies, sectoral regulator consent, lender and landlord waivers, change-of-control consents under material contracts, and completion of any remedial steps the diligence called for. Who bears the risk of a condition failing, and what level of effort is owed to satisfy it, are matters for express allocation in the agreement.

Completion is a documented sequence of resolutions, transfer instruments properly stamped under the legislation applicable to them, updates to the register of members, share certificate endorsement or depository instruction, changes to directors and authorised signatories, and statutory filings within their prescribed periods. The period afterwards carries its own workstream: escrow release, transitional services while the target is separated from the seller’s finance function, novation of contracts that could not be assigned before completion, and monitoring of the warranty claim periods.