Cross Purchase Buy Sell Agreement for India

Cross Purchase Buy Sell Agreement Template for India

A comprehensive legal agreement governed by Indian law that establishes the framework for business owners to buy out each other's interests in specific circumstances such as death, disability, retirement, or voluntary exit. The agreement operates under the Indian Contract Act, 1872, and Companies Act, 2013, ensuring compliance with local corporate and contractual requirements. It includes detailed provisions for valuation methodologies, funding mechanisms (often through insurance policies), payment terms, and transfer procedures, while incorporating necessary safeguards for all parties involved in accordance with Indian legal standards.

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What is a Cross Purchase Buy Sell Agreement?

The Cross Purchase Buy Sell Agreement serves as a critical business succession planning tool in the Indian legal context, particularly suitable for closely-held companies and partnerships. It becomes essential when business owners want to maintain control over ownership transitions and ensure business continuity. Typically implemented when a company has multiple shareholders who want to prevent unauthorized third-party entries and establish clear procedures for ownership transfers. The agreement operates within the framework of Indian corporate and contract law, specifically adhering to the Companies Act, 2013 and Indian Contract Act, 1872. It includes comprehensive provisions for various trigger events, valuation methods, funding mechanisms (often through life insurance), and detailed procedures for executing the purchase and sale of shares. This type of agreement is particularly valuable for protecting both the departing owner's interests and the company's stability during ownership transitions.

What sections should be included in a Cross Purchase Buy Sell Agreement?

1. Parties: Identification of all shareholders/business owners entering into the agreement

2. Background: Context of the business, existing ownership structure, and purpose of the agreement

3. Definitions: Key terms used throughout the agreement including triggering events, fair market value, and other specific terminology

4. Purchase Obligations: Core obligations of surviving/remaining shareholders to purchase shares upon trigger events

5. Trigger Events: Comprehensive list of events activating the buy-sell provisions (death, disability, retirement, voluntary transfer, etc.)

6. Purchase Price and Valuation: Methods for determining share value and price calculation procedures

7. Payment Terms: Structure and timing of payments for purchased shares

8. Funding Mechanism: Details of insurance policies or other funding sources for share purchases

9. Transfer Restrictions: Limitations on share transfers and right of first refusal provisions

10. Notice Requirements: Procedures for notifying parties of trigger events and purchase intentions

11. Closing Procedures: Steps for completing the purchase and transfer of shares

12. Representations and Warranties: Standard declarations by all parties regarding authority, ownership, and compliance

13. Governing Law and Jurisdiction: Specification of applicable law and jurisdiction for dispute resolution

14. Term and Termination: Duration of the agreement and conditions for termination

What sections are optional to include in a Cross Purchase Buy Sell Agreement?

1. Disability Provisions: Detailed provisions for handling permanent disability of shareholders, used when disability insurance is part of the funding mechanism

2. Retirement Planning: Special provisions for planned retirement exits, including gradual buyout options

3. Family Transfer Exceptions: Special provisions for transfers to family members or trusts, used when parties want to allow certain exempt transfers

4. Tag-Along Rights: Rights of minority shareholders to join in sale to third parties, used in cases with significant ownership disparities

5. Drag-Along Rights: Rights of majority shareholders to force minority participation in sale, used in cases with significant ownership disparities

6. Mediation Clause: Alternative dispute resolution procedures, recommended for long-term business relationships

7. Cross-Border Provisions: Special provisions for international shareholders or assets, used when any party is non-resident

What schedules should be included in a Cross Purchase Buy Sell Agreement?

1. Schedule A - Current Shareholding: Details of current share ownership and shareholding percentages

2. Schedule B - Valuation Formula: Detailed methodology for business valuation including specific calculations and adjustments

3. Schedule C - Insurance Policies: Details of life insurance policies including policy numbers, coverage amounts, and beneficiaries

4. Schedule D - Permitted Transfers: List of pre-approved transfer scenarios and exempt transfers

5. Schedule E - Company Information: Key company details including registration numbers, registered office, and business locations

6. Appendix 1 - Share Certificate Format: Template for share certificates and transfer documentation

7. Appendix 2 - Notice Forms: Standard forms for various notices required under the agreement

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Cost

Free to use

Relevant legal definitions

Clauses

Relevant Industries

Professional Services

Manufacturing

Family Business

Technology

Healthcare

Retail

Consulting

Real Estate

Construction

Agriculture

Relevant Teams

Legal

Finance

Corporate Secretarial

Compliance

Risk Management

Board of Directors

Executive Leadership

Corporate Governance

Relevant Roles

Chief Executive Officer

Managing Director

Company Secretary

Chief Financial Officer

Legal Counsel

Business Owner

Partner

Shareholder

Corporate Lawyer

Finance Director

Risk Manager

Compliance Officer

Board Member

Managing Partner

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What is a Cross Purchase Buy Sell Agreement?

What sections should be included in a Cross Purchase Buy Sell Agreement?

What sections are optional to include in a Cross Purchase Buy Sell Agreement?

What schedules should be included in a Cross Purchase Buy Sell Agreement?

Authors

Alex Denne

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