By S&S Co. Advocates & Solicitors · Published 25 September 2026 · Informational content, not legal advice: see our disclaimer
The Three Basic Structures
A business transfer in India is typically structured in one of three ways: a slump sale, where an entire business undertaking is transferred as a going concern for a single lump-sum consideration without values being assigned to individual assets and liabilities; an itemised asset sale, where specific assets (and sometimes specific liabilities) are individually identified, valued and transferred; or a share sale, where the buyer instead acquires the shares of the company that owns the business, leaving the underlying entity, its assets, contracts and liabilities intact.
Each structure carries a materially different legal and commercial profile, and the choice is rarely made on a single factor alone.
Liability Exposure Differs Sharply
In a share sale, the buyer inherits the target company entire, including known and unknown liabilities, contingent litigation, and historical compliance defaults, unless specifically carved out and indemnified for under the share purchase agreement. In a slump sale or itemised asset sale, the buyer generally takes on only the liabilities that are expressly identified and assumed as part of the transfer, leaving other liabilities of the seller behind with the seller.
This makes asset-style structures attractive to a buyer worried about undisclosed liabilities in a target with a long or opaque operating history, while a share sale is often preferred where continuity of the legal entity itself, its licences, long-term contracts, or credit history, is commercially important.
Third-Party Consents and Contract Continuity
A share sale generally does not require third-party counterparties to consent to an assignment, since the contracting entity itself does not change: only its shareholders do, subject to any change-of-control clause in the contracts. A slump sale or asset sale, by contrast, typically requires the buyer to obtain fresh consents or novation from key customers, suppliers, lenders and landlords, since the contracting party is changing. Licences, permits and regulatory approvals held by the business may also need to be freshly obtained or transferred, depending on the sector and the specific licence's terms.
Employee Transfer Considerations
A share sale leaves the employer entity unchanged, so employees continue under their existing terms without any transfer event. A slump sale or asset sale, however, involves employees moving to a new employer entity, which typically requires careful structuring, commonly through a business transfer agreement addressing continuity of service, statutory dues, and consent where required, to avoid the transfer being treated as a termination of employment.
A Practical Way to Decide
There is no universally 'better' structure: the right choice depends on the buyer's appetite for legacy liability risk, whether the target's licences and long-term contracts are difficult to replicate from scratch, the tax profile each structure produces (which should always be separately examined by tax counsel), and how much the deal timeline can accommodate third-party consent processes. Businesses should map out these factors early, since restructuring a deal from one route to another midway through negotiation is often costly and can unsettle counterparties.
Frequently Asked Questions
What is the key legal difference between a slump sale and an itemised asset sale?
In a slump sale, the entire business undertaking transfers as a going concern for a single lump-sum consideration, with no values assigned to individual assets or liabilities in the transfer documentation. In an itemised asset sale, specific assets are individually identified and valued, which is a different legal and compliance treatment even if the practical business handed over looks similar.
Does a share sale avoid the need for third-party consents?
Generally yes for ordinary commercial contracts, since the contracting entity itself does not change in a share sale, though a change-of-control clause in a specific contract can still require notice or consent even where the entity is unchanged.
Which structure is safer for a buyer worried about the target's undisclosed liabilities?
An asset-style structure (slump sale or itemised asset sale) generally limits the buyer's exposure to the liabilities expressly assumed in the transfer documents, whereas a share sale brings the buyer into the target company as it stands, including undisclosed liabilities, unless specifically indemnified.
Do employees automatically transfer in a slump sale?
No: employees move to the new employer entity and the transfer needs to be carefully structured, typically through the business transfer agreement, to preserve continuity of service and address statutory dues, rather than being treated as a termination of the existing employment.
References & Further Reading
This article references the following statutory provisions. Readers should always verify current rules, fees and timelines against the applicable statute and rules as amended, since these are revised from time to time.
- Companies Act, 2013, and applicable rules governing business and asset transfers.
- General principles of contract law on assignment and novation of commercial agreements.
- This guide addresses legal structuring considerations only; tax characterisation of slump sale, asset sale and share sale structures should always be assessed separately with qualified tax counsel.