The IUP Journal of Accounting Research and Audit Practices:
Special Purpose Acquisition Companies: An Overview of Their Structure and Legal Status in India

Article Details
Pub. Date : Jan, 2022
Product Name : The IUP Journal of Accounting Research and Audit Practices
Product Type : Article
Product Code : IJARAP50122
Author Name : Sireesha Mamidenna*
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 8



Special Purpose Acquisition Companies (SPAC) are created so that investors can invest based on their confidence in the ability and professional expertise of the sponsors to pick the right target companies to acquire and take public. Proceeds from a SPAC Initial Public Offering (IPO) are generally held in a trust within an escrow account till a suitable target is acquired by the SPAC. This enables shareholders to vote on any proposed acquisition by the sponsor prior to the business combination transaction. Studies show that most of the SPAC currently listed in the US and European exchanges are domicile neutral. So far, the Indian legislature has not come up with any comprehensive regulatory requirement for the SPAC. The booming corporate growth in India as witnessed by more than 72 IPOs in 2021 so far portends a positive outlook for SPAC in India and calls for the regulatory framework to be in place along with necessary provisions made in applicable laws.


Special Purpose Acquisition Companies (SPAC) have seen unprecedented popularity in the US in 2020 and 2021, having already surpassed $100 bn of capital raised in 2021 alone ($138 bn as of October 2021).1 These SPAC, in most of the cases, are companies floated by investment professionals and experienced management teams who possess well-established track records, often in specific industries or market segments. The founders of SPAC are called the sponsors of the SPAC. In essence, investors invest in SPAC based on their confidence and trust in the ability of the sponsors to pick the right target companies to acquire and take public based on the sponsors' professional expertise.

The life-cycle of a typical SPAC begins with the sponsor forming a company, designated as a SPAC and raising money from the public equity markets on that company through an Initial Public Offering (IPO) of shares usually at their face value, with a sizeable portion