The Deposit Agreement For Business Purchase is a crucial document used in Indian business acquisitions to formalize the payment and handling of a deposit, which serves as a commitment towards the purchase of a business. This agreement is typically executed before or alongside the main purchase agreement when a buyer is serious about proceeding with a business acquisition but needs time for due diligence, financing arrangements, or regulatory approvals. The document is essential in the Indian legal context as it provides security to the seller while protecting the buyer's interests through clearly defined refund conditions. It must comply with Indian contract law, including the Indian Contract Act, 1872, and may require stamp duty payment depending on the state of execution. The agreement typically includes detailed provisions about the deposit amount, payment mechanism, holding conditions, interest (if any), and the circumstances under which the deposit may be refunded or forfeited.
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1. Parties: Identification of the buyer (depositor) and seller (recipient), including full legal names, addresses, and registration details if companies
2. Background: Context of the transaction, including brief description of the business being purchased and purpose of the deposit
3. Definitions: Key terms used throughout the agreement, including 'Business', 'Deposit', 'Completion Date', 'Purchase Agreement', etc.
4. Deposit Amount and Payment: Specification of deposit amount, payment method, and timing
5. Purpose of Deposit: Clear statement of deposit's purpose as security for the business purchase
6. Conditions for Holding Deposit: Terms under which the seller will hold the deposit, including any escrow arrangements
7. Application of Deposit: How the deposit will be applied to the purchase price upon completion
8. Refund Conditions: Circumstances under which the deposit must be refunded to the buyer
9. Forfeiture Conditions: Circumstances under which the seller may retain the deposit
10. Relationship with Purchase Agreement: How this agreement relates to the main business purchase agreement
11. Governing Law and Jurisdiction: Specification of Indian law as governing law and jurisdiction for disputes
12. Notices: Process and requirements for formal communications between parties
13. Execution: Signature blocks and execution requirements
1. Interest on Deposit: Terms for any interest accruing on the deposit amount, used when deposit is substantial and held for an extended period
2. Escrow Arrangements: Details of third-party escrow if deposit is not held directly by seller
3. Due Diligence Period: Include when deposit is tied to a due diligence timeline
4. Tax Provisions: Special tax considerations or allocations, used when tax implications are significant
5. Confidentiality: Specific confidentiality obligations, used when not covered in a separate NDA
6. Force Majeure: Provisions for extraordinary events, used when extended holding periods are contemplated
7. Assignment: Rights to assign the agreement, used when either party might need to transfer rights
8. Third Party Rights: Rights of third parties, used when other stakeholders are involved
1. Schedule 1 - Business Description: Detailed description of the business being purchased
2. Schedule 2 - Deposit Payment Details: Bank account or payment mechanism details for deposit transfer
3. Schedule 3 - Timeline: Key dates including deposit payment, due diligence period, and intended completion
4. Schedule 4 - Required Approvals: List of regulatory or third-party approvals needed for the transaction
5. Appendix A - Form of Purchase Agreement: Draft or agreed form of the main purchase agreement, if available
6. Appendix B - Corporate Authorizations: Copies of relevant board resolutions or authorizations
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