Business Transfer Agreement (“BTA”) is a purchase and transfer of ownership agreement in which the details concerning the sale of the business and its assets are outlined along with the transfer type, sale type, sale terms, and details of the transferrable. i.e., BTA is designed for the sale of assets and liabilities of one entity to another entity. The BTA, also, lists the contracts, customer names, lease, Insurance, employment rights, assets, liability, capital, inventory, tax issues, patents, and copyrights.

A BTA is also referred to as slump sale commonly and it records the below terms and conditions in most cases.

• Assets and liabilities of the business undertaking to be transferred are listed in the BTA schedule.
• Lump-sum consideration for the sale is specified.
• The closing date before which all necessary approvals, permissions, documents to complete the transaction are to be obtained. The transfer of business taking place on the Closing Date is captured.
• Necessary warranties specifying good standing guarantee by the parties are generally included.

BTAs are generally arranged in two methods. The first method is structured as an “agreement to sell”, a detailed manner in which the business undertaking is to be sold. It specifies the intent of parties to an intended slump sale with the actual sale to follow post-BTA. So, this method of Business Transfer Agreement is an indication of intent, achieved by subsequent binding documents.

The second method of Business Transfer Agreement is where the Business Transfer Agreement triggers the sale of the business undertaking and with payment consideration i.e., Business Transfer Agreement itself concludes the sale of the business undertaking and Business Transfer Agreement can be treated as a deed of conveyance.

A typical Business Transfer Agreement is stamped as a “conveyance” under the Stamp Act with the applicable rate as per the state in which stamp duty is paid. However, an agreement to sell a business undertaking with its assets shall be a contract to sell.

Analysis of both the methods of BTA shows that a Business Transfer Agreement is in the form of an agreement to sell and chargeable to stamp duty under the Stamp Act, and the conveyance deed through which the assets of the entity, are to be transferred.  

The stamp duty implications will depend on the nature of the asset that is being transferred and the tool through which it is being transferred.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.