A transition services agreement should identify the services, dependencies, performance standards, costs and exit milestones needed after a carve-out. Address data, licences, personnel and third-party consents. A generic obligation to provide reasonable assistance may not be enough to keep a separated business functioning.
The business situation
A buyer acquires a division but depends on the seller's payroll, ERP and procurement systems for several months. The transfer agreement says support will continue, while neither party has documented the users, interfaces, licences or support hours involved.
The diligence question is not merely whether a defect exists. It is whether the defect changes value, transaction structure, conditions to closing or the buyer's ability to operate the business. A share acquisition, business transfer and asset purchase allocate rights and liabilities differently.
What needs examining
01. Describe the service from the receiving business's perspective
Identify the outputs, service windows, systems, volumes and named dependencies. Confirm which services the seller can lawfully provide and whether supplier licences or customer commitments permit continued use. Separate transitional access from a permanent right to intellectual property. The scope should be intelligible to the teams expected to perform it.
02. Balance continuity with defined limits
Set fees, change control, service standards and escalation appropriate to a temporary arrangement. Address responsibility for incidents, data processing and additional capacity. A seller may reasonably limit transformation work, but the buyer needs clarity on ordinary support. Review liability and remedies alongside the practical ability to replace the service.
03. Make the exit measurable
Assign owners and dates for migration, testing, acceptance and access removal. Define extension rights and pricing where delay is foreseeable. Check that the buyer receives the records and configuration it needs before services end. A transition agreement should reduce dependency over time, with evidence that each milestone has been met.
Law, contract and recommended practice
The Companies Act, 2013, contract law and transaction-specific tax, competition, foreign-exchange, employment and sector requirements may apply. Approval and filing obligations should be checked against the actual parties, structure and thresholds, rather than inferred from the transaction's headline value.
Connect the control to the evidence
Use this table to scope the review. The legal basis and the practical control are identified separately.
| Obligation or objective | Practical control | Evidence to retain |
|---|---|---|
| Contractual control Provide the agreed temporary services | Detailed service and dependency schedules | Service reports and issue log |
| Law, where applicable Maintain lawful access and processing | Licence, consent and data-role review | Permissions and processing terms |
| Recommended practice Complete separation without a service gap | Migration and acceptance milestones | Test results and signed transition record |
Records to prepare
Bring the complete, current record to the review. Preserve earlier versions where a change or disputed event makes them relevant.
Common questions
Can the seller simply extend its software licences to the buyer?
Not necessarily. The licence terms, parties and permitted use need to be checked. A corporate transfer agreement cannot unilaterally expand a third-party licence.
Should the TSA end on a date alone?
A clear end date is useful, but operational milestones, extension rules and acceptance evidence help manage foreseeable migration risk. The structure should reflect the services and negotiating position.
Walk through the buyer's first payroll, first invoice and first system incident after closing. Each dependency should have an agreed service, owner and exit route.
Legislation & official resources
These references identify the governing frameworks. Confirm the current text, relevant amendments and applicable judicial position for the matter.
- Companies Act, 2013 — official legislative portalIndia Code · Government of India · Locate the current Act and applicable rules on India Code. Company category, exemptions and amendments matter.
- Indian Contract Act, 1872Government of Uttar Pradesh · Commercial Tax Department · Government-hosted statutory reference. Read with applicable amendments, special law and judicial interpretation.
- Master Direction — Foreign Investment in IndiaReserve Bank of India · Official direction, displayed as updated to 15 June 2026 when reviewed. Read with the NDI Rules and applicable sector policy.
This note is general information. The scenario is hypothetical and does not describe a client matter. The legal result depends on the facts, documents, jurisdiction and operative law. No individual lawyer review is represented by the preparation date.
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