Entity Buy Sell Agreement for India

Entity Buy Sell Agreement Template for India

A comprehensive legal agreement governed by Indian law that establishes the terms and conditions for the purchase and sale of ownership interests in a business entity. This document outlines trigger events, valuation mechanisms, and procedures for transferring ownership stakes while ensuring compliance with Indian corporate laws, including the Companies Act 2013 and relevant state regulations. It provides a structured framework for managing ownership transitions, protecting stakeholder interests, and maintaining business continuity while adhering to Indian regulatory requirements and market practices.

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What is a Entity Buy Sell Agreement?

The Entity Buy-Sell Agreement is a crucial document in Indian business operations that provides a predetermined framework for handling ownership transitions in various scenarios. Typically implemented at the formation of a business or when significant ownership changes occur, this agreement is essential for privately held companies operating under Indian jurisdiction. The document addresses critical aspects such as trigger events (death, disability, retirement), valuation methodologies compliant with Indian accounting standards, funding mechanisms, and transfer procedures while ensuring compliance with Indian corporate laws. It serves as a risk management tool by providing clarity on ownership succession, preventing disputes, and maintaining business continuity. The agreement must align with various Indian regulations including the Companies Act 2013, Income Tax Act 1961, and relevant state laws, making it a vital instrument for corporate governance and succession planning.

What sections should be included in a Entity Buy Sell Agreement?

1. Parties: Identification of all parties to the agreement, including the entity and shareholders

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

3. Definitions and Interpretation: Definitions of key terms and interpretation rules

4. Transfer Restrictions: General restrictions on transfer of shares/ownership interests

5. Trigger Events: Events triggering buy-sell provisions (death, disability, retirement, termination, etc.)

6. Valuation Mechanism: Method for determining the purchase price of shares/interests

7. Purchase and Sale Obligations: Process and obligations for executing the purchase/sale

8. Payment Terms: Terms and conditions for payment, including timing and method

9. Funding Provisions: Sources of funding for purchases, including insurance requirements if applicable

10. Rights and Obligations: Ongoing rights and obligations of parties during the process

11. Representations and Warranties: Standard representations and warranties from all parties

12. Confidentiality: Provisions regarding confidential information

13. Governing Law and Jurisdiction: Applicable law and jurisdiction for dispute resolution

14. Notices: Process and requirements for formal notices under the agreement

15. General Provisions: Standard boilerplate provisions including amendments, waivers, etc.

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

1. Tag-Along Rights: Optional provision giving minority shareholders right to join in sale of majority stake

2. Drag-Along Rights: Optional provision allowing majority shareholders to force minority to join in sale

3. Right of First Refusal: Optional provision giving existing shareholders priority right to purchase shares

4. Insurance Provisions: Detailed section when life/disability insurance is used to fund purchases

5. Foreign Investment Compliance: Required when foreign entities are involved, addressing FEMA compliance

6. Competition Law Compliance: Required for larger transactions subject to Competition Act thresholds

7. Tax Matters: Detailed tax provisions when complex tax implications exist

8. Dispute Resolution: Detailed arbitration or mediation procedures if preferred over court jurisdiction

What schedules should be included in a Entity Buy Sell Agreement?

1. Schedule 1 - Shareholding Pattern: Current shareholding structure and ownership details

2. Schedule 2 - Valuation Formula: Detailed methodology for calculating company/share value

3. Schedule 3 - Insurance Policies: Details of insurance policies funding the agreement

4. Schedule 4 - Form of Transfer Notice: Template for initiating transfer under the agreement

5. Schedule 5 - Deed of Adherence: Template for new shareholders to join the agreement

6. Appendix A - Company Information: Key company details, registrations, and licenses

7. Appendix B - Reporting Requirements: Required financial and operational reports for valuation

8. Appendix C - Compliance Certificates: Required regulatory and statutory compliance certificates

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

Jurisdiction

India

Publisher

Genie AI

Document Type

Sales Contract

Sector

Sales

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Technology

Manufacturing

Professional Services

Real Estate

Healthcare

Retail

Financial Services

Education

Construction

Agriculture

Logistics

Telecommunications

Media and Entertainment

Energy

Relevant Teams

Legal

Finance

Corporate Secretarial

Compliance

Risk Management

Corporate Governance

Board of Directors

Executive Leadership

Treasury

Tax

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Secretary

Legal Counsel

Corporate Lawyer

Managing Director

Board Director

Shareholder

Business Owner

Managing Partner

Finance Director

Compliance Officer

Risk Manager

Corporate Governance Officer

Business Development Director

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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