Specimen Deed of Sale explained: this guide covers what Specimen Deed of Sale means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
What Is a Sale of Business?
A sale of business (also called business transfer or going concern sale) involves the transfer of an entire business undertaking — including all assets (tangible and intangible), liabilities, employees, contracts, licenses, and goodwill — from the seller to the buyer. Under Indian law: this can be structured as: (a) a slump sale (entire undertaking for a lump sum — Section 2(42C) of the Income Tax Act), (b) an itemised sale (individual assets sold separately), or (c) a business transfer agreement (BTA). The deed must comprehensively cover all assets and liabilities being transferred to avoid disputes.
Specimen Deed — Sale of Business
DEED OF SALE OF BUSINESS
This Deed is made on at
BETWEEN:
, (the "Seller/Transferor")
AND
, (the "Buyer/Transferee")
RECITALS
(a) The Seller has been carrying on the business of at under the name and style of "" (the "Business").
(b) The Seller desires to sell and the Buyer desires to purchase the Business as a going concern, including all assets, liabilities, goodwill, and the right to use the business name, on the terms set out herein.
OPERATIVE CLAUSES
1. Sale of Business: The Seller hereby sells, transfers, conveys, and assigns to the Buyer the Business as a going concern, including ALL assets listed in Schedule A and ALL liabilities listed in Schedule B, together with the goodwill of the Business, with effect from (the "Effective Date").
2. Consideration: The total consideration for the sale is Rs. (Rupees only) — payable as: (a) Rs. on execution of this Deed, (b) Rs. within [30/60] days, (c) Rs. held in escrow for [6/12] months for indemnity claims. The allocation of consideration among different asset categories is set out in Schedule C .
3. Schedule A — Assets Transferred:
(a) Immovable Property: /
(b) Movable Assets: Plant, machinery, equipment, furniture, vehicles — as per list in Annexure 1
(c) Inventory: Raw materials, work-in-progress, finished goods — valued at Rs. as on the Effective Date
(d) Book Debts: Trade receivables as per list in Annexure 2
(e) Contracts: All contracts, agreements, purchase orders, and customer commitments — as per list in Annexure 3
(f) Intellectual Property: Trademarks, trade names, patents, copyrights, designs, domain names — as per Annexure 4
(g) Goodwill: The goodwill of the Business including the right to use the business name "" and all associated brand value
(h) Licenses and Permits: All business licenses, permits, registrations, and approvals — to the extent transferable
(i) Records: All business records, customer databases, supplier databases, employee records, and financial records
4. Schedule B — Liabilities Assumed:
(a) Trade creditors as per list in Annexure 5
(b) Employee liabilities — gratuity, leave encashment, PF arrears
(c) Outstanding statutory dues — GST, TDS, property tax
(d)
5. Employees: All employees of the Business as on the Effective Date shall be transferred to the Buyer on terms and conditions not less favorable than their existing terms. The Buyer shall: (a) recognize their continuity of service, (b) absorb all employee liabilities (gratuity, leave, PF), (c) not retrench any employee for [12] months from the Effective Date. Employees who do not consent to transfer shall be dealt with by the Seller.
6. Seller's Non-Compete: The Seller shall NOT, directly or indirectly, carry on, engage in, or assist any business that competes with the Business within for a period of [3/5] years from the Effective Date.
7. Seller's Warranties: The Seller represents and warrants: (a) good and marketable title to all assets, (b) no undisclosed liabilities, (c) all material contracts are valid and subsisting, (d) no pending litigation that could materially affect the Business, (e) all tax returns filed and taxes paid up to the Effective Date, (f) all necessary consents obtained (or will be obtained), (g) employee records are accurate and complete, (h) no environmental liabilities.
8. Indemnity: The Seller indemnifies the Buyer against all losses arising from: (a) breach of any warranty, (b) undisclosed liabilities relating to the pre-transfer period, (c) tax demands for the pre-transfer period, (d) third-party claims arising from the Seller's acts before the Effective Date. Indemnity claims must be notified within [12/24] months. Maximum indemnity: % of the consideration.
9. Transition: The Seller shall: (a) cooperate with the Buyer for a period of [3/6] months post-transfer for smooth transition, (b) introduce the Buyer to key customers, suppliers, and stakeholders, (c) provide access to knowledge, relationships, and business processes, (d) not solicit the Business's customers or employees for [3/5] years.
Slump Sale vs Itemised Sale — Tax Implications
| Feature | Slump Sale | Itemised Sale |
|---|---|---|
| Definition | Entire undertaking for lump sum (S.2(42C) IT Act) | Individual assets sold separately |
| Consideration | Not split among assets | Allocated to each asset |
| Capital Gains | LTCG/STCG on net worth of undertaking | Capital gains on each asset separately |
| GST | Not applicable (transfer of going concern — exempt) | GST on each asset at applicable rate |
| Stamp Duty | On conveyance value of immovable property | On each immovable property separately |
| Depreciation (Buyer) | On allocated consideration or FMV | On individual asset purchase price |
GST Exemption for Going Concern
Under Entry 2 of Schedule II read with Notification 12/2017 (CGST): transfer of a business as a going concern is EXEMPT from GST — no GST is payable on the transfer consideration. Conditions: (a) the transfer must be of the ENTIRE business (or an independent part thereof), (b) as a going concern — with all assets and liabilities, (c) the business must continue to operate after transfer. If individual assets are sold separately (not as a going concern): GST applies at the applicable rate on each asset.
Non-Compete in Sale of Goodwill
Under Section 27 of the Indian Contract Act: agreements in restraint of trade are generally VOID. However: the Exception to Section 27 permits a non-compete clause in the sale of goodwill of a business — the seller may agree not to carry on a similar business within specified local limits, as long as the buyer or a successor continues to carry on the business. The restriction must be REASONABLE in: (a) geographic scope, (b) duration, (c) nature of restricted activities. Courts assess reasonableness case by case — a 5-year non-compete within the same city is generally upheld; a 20-year nationwide restriction may be struck down as unreasonable.
Disclaimer: This article is for informational purposes only and does not constitute legal or professional advice. While every effort has been made to ensure accuracy based on the latest laws and amendments, readers should consult a qualified professional before acting on any information provided. For expert assistance, contact us.