Business Transfer Agreement -BTA

published by | April 8, 2025

A Business Transfer Agreement (BTA) is a legal document used when a business (or a part of it) is being sold or transferred from one party to another. It outlines all the terms and conditions of the sale, making sure both parties

Re-organizing the business whether financial, technological, organizational by way of merger, amalgamation, arrangement, compromise, demerger, acquisition, takeover, strategic alliance or slump sale is a complicated and a lengthy process.

Business Transfer Agreement is an agreement executed by and amongst the transferor and the transferee company to by way of executing a slump sale where every asset and the liability of one or more units transferred, sold, leased or assigned to any other for the lump sum consideration. This type of agreement provides ownership of other businesses.

As per section 2(42C) of Income -tax Act 1961, ‘slump sale’ means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.

Business Transfer Agreement

Importance of Business Transfer Agreements

  • It helps in improving the business performance post-integration.
  • It helps in improving the focus on core areas and also helps in optimizing operational synergies.
  • It helps in facilitating the strategic investments.
  • It helps in availing of tax and the regulatory advantages associated with the business.

Key Features of a BTA

  • Transfer of Business as a Going Concern

    • The business is transferred with all its assets, liabilities, employees, contracts, etc., so it continues operating as usual.

  • Slump Sale or Asset Sale

    • In a slump sale, the business is sold for a lump sum amount without assigning individual values to assets and liabilities.

    • In an asset sale, specific assets and liabilities are identified and transferred.

  • Legally Binding

    • Once signed, both parties are legally bound to follow the terms mentioned in the agreement.

Modes of Execution of Business Transfer Agreement

There are two modes available in which Business Transfer Agreement can be formed which are mentioned below:

  • Agreement to sell: It is only the way in which respective business undertaking is to be sold shall be laid down. The agreement executed itself does not result in  transfer of the undertaking on immediate basis, rather it is an underlying agreement whereby the intent of parties is laid down giving effect to an intended slump sale and the actual sale is carried out by diverse agreements/documents. Therefore, it only remains as an indication of the intention, effectuated by the subsequent binding documents.
  • Deed of conveyance: It is the agreement or the Deed which leads to the sale of the business undertaking and the payment of consideration received for the undertaking. In this type of document, parties agrees to transfer the said undertaking and actually effects the transfer of undertaking.

FAQs

What is a Business Transfer Agreement?

A Business Transfer Agreement is a contract between a seller (who owns a business) and a buyer (who wants to purchase it). It is usually used in slump sale, asset sale, or business restructuring.

When is a Business Transfer Agreement Used?

  • Selling or buying a business (fully or partially).
  • Mergers and acquisitions.
  • Internal restructuring within a group of companies.
  • Selling a business division/unit.
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