Legal aspects of designing a "Special Purpose Acquisition Company (SPAC)" in India

Abstract

Special Purpose Acquisition Companies or SPACs are publicly listed shell companies with no operations of their own. The main goal of these companies is to scout for a suitable target private company to merge with. There have been numerous such companies since the 1990s in the USA, Canada and other developed economies. As the market for SPACs has matured, the terms and conditions for SPACs have become more and more favourable for the investors and the participation of leading banks in underwriting the issue has made SPACs more attractive. Such trends have placed SPACs firmly as source of capitalization for small and mid‐sized companies. However despite this, SPACs have not received the kind of research coverage they perhaps deserve. This is mostly due to the sceptical attitude of the traditional sell side investors who are not sure about the deals going through. SPACs have received even more sparse coverage in India. In fact though there are a number of SPACs operating in India scouting around for prospective targets, but there is no SPAC registered in India. There are various laws, which make it difficult for blank shell companies like SPACs to register in the India. Perhaps, it is more difficult to make an ordinary Indian investor to get convinced about the prospects of such companies. However, with the capital market in India getting more and more mature and growing at a rapid pace, introduction of SPACs in India seems like just a matter of time.