How to transfer a sports franchise in India: Part 1 – Legal checklist

In this article, I will walk you through the legal and regulatory landscape of transferring sports franchises in India. From the contractual framework to the actual steps involved, you will find a comprehensive guide to navigating what is often a complex but rewarding legal transaction.

Introduction: The case of Sunrisers Hyderabad and what it tells us about franchise transfers

2008 was a good year for me. I discovered cricket and the Indian Premier League. I had picked my favourite team, and it has remained the same after so many years. 

In 2012, IPL had already become a national obsession, and the now-defunct Deccan Chargers were struggling both on the field and off it. What unfolded over the next few months was not just a story of cricketing fortunes. I was actually too young to understand it at that time, but looking back, it was actually quite a compelling legal and commercial case study in how sports franchises are transferred in India.

I will tell you why.

Deccan Chargers, originally based in Hyderabad, had won the IPL in 2009. But soon after found themselves caught in a storm of financial and contractual defaults. This led to the Board of Control for Cricket in India (BCCI) terminating their franchise, citing breach of contractual obligations, including issues with player payments and failure to furnish bank guarantees.

The matter even went into arbitration and litigation, but in the meantime, the BCCI invited fresh bids. Unfortunately, there is no time to waste in an IPL setting. A new franchise was awarded to Sun TV Network, which went on to create the Sunrisers Hyderabad.

This was not just a simple sale and purchase. It involved compliance with the IPL Operational Rules, intense scrutiny of the bidder’s financial health, approval from the league governing council, and legal structuring that would ensure continuity for players, sponsors, and fans. In hindsight, the Sunrisers’ entry marked one of the earliest and clearest examples of how Indian sports franchises are not just teams, they are business assets governed by intricate contracts and league regulations.

If you are a lawyer advising a client on buying a team, or if you are part of a franchise ownership group looking to exit or restructure, you need to understand that transferring a sports franchise in India is unlike selling a regular company. You are dealing with a multi-layered system that includes league permissions, intellectual property rights, commercial contracts, and at times, public sentiment, such as fan reactions or fan protests influencing league decisions. But this does not mean it comes into play in legal matters. 

Let us begin by understanding what exactly constitutes a sports franchise in India.

What is a sports franchise in India?

At first glance, a sports franchise might appear to be just a team, a collection of players, coaches, and support staff. However, from a legal perspective, a franchise is far more complex. 

It is, at its core, a bundle of rights granted by a league organiser to a private party, enabling the franchisee to operate a team within a league structure for a specified period, under certain conditions.

Let me illustrate this with a practical example. When a company acquires a franchise in the Indian Super League (ISL) or the Indian Premier League (IPL), it does not “own” the league or even its slot in perpetuity. 

So, yes, BCCI essentially owns IPL. But the teams do not have a permanent slot. Even the marquee teams like Royal Challengers Bengaluru (RCB) and Chennai Super Kings (CSK) do not “own” a permanent or absolute right to a slot in the IPL. Their participation is governed by a franchise agreement with the Board of Control for Cricket in India (BCCI), which lays out terms and conditions, including duration, compliance requirements, financial obligations, and league rules.

For instance, Rising Pune Supergiant, a franchise that played in the IPL during 2016 and 2017, was a temporary replacement team while Chennai Super Kings and Rajasthan Royals were suspended. Despite significant investments in players and branding, Rising Pune Supergiant’s participation was conditional and time-bound, governed by the terms of its agreement with the Board of Control for Cricket in India (BCCI). Once the suspension of the original teams was lifted, Rising Pune Supergiant ceased to exist in the league structure, it had no permanent “ownership” of a spot in the IPL.

Similarly, in the ISL, clubs like Delhi Dynamos rebranded and relocated to become Odisha FC, showcasing how even continued participation in the league is subject to regulatory approvals and league governance, not an absolute property right.

So then what is the process?

Teams instead of owning, it signs a detailed Franchise Agreement with the league authority, such as the BCCI in the case of IPL, or Football Sports Development Limited (FSDL) for the ISL. This agreement outlines the rights, duties, restrictions, and conditions applicable to the franchisee. 

These rights typically include the right to field a team under a specific brand name and location, and access to league-generated revenue, such as central sponsorship and broadcasting income

The team will also have the permission to engage in local sponsorships and merchandising, subject to league guidelines. They can use the league’s intellectual property for marketing and commercial activities

Team can further participate in drafts or auctions for players and the right of access to league-organised facilities, events, and technical support

At the same time, franchisees are bound by extensive obligations. These include compliance with operational rules, timely payment of fees, adherence to player contracts and salary caps, and maintaining the reputation and standards of the league. Most agreements also contain strict clauses prohibiting the transfer or assignment of the franchise without prior written consent from the league authority.

It is important to note that the franchise itself is not a standalone legal entity. Rather, it is a contractual right attached to a legal entity, usually a company or LLP, that enters into the agreement with the league. This distinction becomes crucial during a transfer, as one must determine whether the ownership of the entity is changing (a share transfer) or whether the entity is transferring its contractual rights to another entity (a business transfer or asset sale). The legal consequences vary considerably in each scenario.

As you can see, a sports franchise in India is not merely a team; it is a carefully negotiated contractual relationship, backed by a significant investment and governed by a strict regulatory and commercial framework. Understanding this structure is the first step in planning or advising on a franchise transfer.

I hope you have understood the crux of this. Now, let us look at it from a legal perspective.

Legal framework governing franchise transfers

Some countries have a system where the sports franchises may be governed by a dedicated sports law or statutory authority. India does not have a central statute regulating the creation, operation, or transfer of sports franchises. 

Instead, the legal framework is largely contractual, supported by existing commercial laws. This means that each franchise transfer must navigate a complex web of legal instruments, including private agreements, company law, intellectual property law, and in some cases, foreign investment and competition regulations.

Let me break this down for you.

1. Contract law – the foundation of all franchise rights

The cornerstone of every franchise arrangement is the Franchise Agreement, which is governed by the Indian Contract Act, 1872. This agreement sets out the terms under which the franchisee is allowed to operate within the league. It typically includes factors like duration of the franchise rights, commercial rights and revenue sharing and restrictions on transfer or assignment. It also includes change of control provisions and conditions for termination or renewal.

Any attempt to transfer a franchise without complying with these contractual terms may result in the termination of the franchise or lead to litigation or arbitration.

2. Company law – when the ownership structure changes

In cases where the franchise is operated by a company, and the transfer is taking place through a change in shareholding or merger, the provisions of the Companies Act, 2013, come into play. For instance, if a new investor acquires a majority stake in the franchise-holding company, that may trigger a change of control clause under the franchise agreement.

Or maybe in the case of a franchise that is transferred through a business transfer arrangement, board resolutions, shareholder approvals, and filings with the Registrar of Companies may be required.

It can also come into play in the event of a merger or demerger involving the franchise-holding company; the National Company Law Tribunal (NCLT) must approve the scheme.

3. Intellectual property law – safeguarding the brand

Franchise teams often have their own logos, trademarks, slogans, and sometimes even copyrights in digital or marketing material. These are valuable assets that must be transferred or assigned properly. This involves the assignment of registered trademarks under the Trade Marks Act, 1999. It also involves the transfer of domain names and digital assets and the review of merchandising and licensing agreements.

You must ensure that the transferee obtains not only the physical and contractual rights but also the legal right to use the brand identity, which may be separately registered or held by a different entity.

4. Foreign investment and FEMA regulations

If the new franchise owner is a foreign entity or individual, or if the transaction involves cross-border payments, the provisions of the Foreign Exchange Management Act, 1999 (FEMA) and relevant Reserve Bank of India (RBI) guidelines must be followed. This includes compliance with pricing guidelines for share transfers, adherence to reporting obligations for inward or outward remittances, and ensuring the transaction structure is aligned with permitted FDI routes.

Sports franchises in India are typically operated by companies incorporated under the Companies Act, 2013, and are governed by FDI rules applicable to the services sector. As per the FDI policy (updated in 2020 and subsequent amendments), 100% FDI is permitted under the automatic route in most service-related activities, including sports businesses, unless specific restrictions apply (e.g., in broadcasting or news media).

Non-compliance with FEMA provisions may lead to regulatory delays, rejection of remittances, or enforcement actions, including penalties or compounding proceedings by the RBI.

5. Competition law – in case of market impact

In rare but significant cases, a franchise transfer may attract scrutiny under the Competition Act, 2002, particularly if it alters the market structure or leads to anti-competitive practices. For example, if a party already owns multiple teams or if the transfer leads to vertical arrangements that restrict competition, the Competition Commission of India (CCI) may step in.

6. League-specific rules and bylaws

Every major league in India operates under its own set of internal regulations. These documents, which may include operational rules, team participation agreements, code of conduct and financial fair play regulations. 

These contain critical clauses relating to franchise transfers. For example, the IPL requires prior written consent from the BCCI for any change in ownership or control. Similarly, the ISL framework gives significant discretion to the league operator in approving or rejecting transfer proposals.

In short, even if two parties have reached a commercial agreement to transfer a franchise, the league’s approval is non-negotiable. You must treat the league as a stakeholder in the process, not just a passive observer.

In the next section, I will walk you through the actual steps involved in transferring a sports franchise in India, including league approval, due diligence, and documentation.

Step-by-step process of transferring a sports franchise in India

Now that you have a sense of the legal framework, let us walk through the actual process involved in transferring a sports franchise in India. This is not a one-document transaction. It requires careful sequencing, proactive engagement with the league, and alignment of legal, financial, and operational interests.

From my experience advising on such deals, here is how you should structure the transaction:

Step 1: Review the Franchise Agreement and league rules

This is your starting point. Before you even draft a term sheet or send out a proposal, review the existing Franchise Agreement to identify:

• Whether the franchise is transferable
• Whether prior consent of the league is required
• Whether a change in ownership or control triggers any termination clause
• Any restrictions on the assignment of IP, commercial rights, or players

You must also check league-specific documents, such as Operational Rules, Code of Conduct, and player regulations, which often contain additional conditions..

Step 2: Engage with the league authority early

You must treat the league body, not just the buyer and seller, as an essential party to the transaction. In most cases, the transfer cannot proceed without their written consent.

Typically, the parties submit a formal proposal or application to the league authority, detailing the nature of the transfer (sale of shares, asset transfer, merger, etc.) and the background of the proposed transferee

Financial statements and the ownership structure of the new entity should be submitted. A declaration of intent to comply with league regulations

The league may conduct its own due diligence on the incoming party before granting approval.

Step 3: Conduct internal due diligence

Once league consent is initiated, both parties (and their legal teams) must perform thorough due diligence. From the buyer’s perspective, you need to examine things like the franchise’s contractual obligations (player contracts, vendor agreements, stadium leases). You will also need to look into any pending litigation or disciplinary matters. 

You must check if there is compliance with tax and financial reporting requirements. Finally, you also need to look into the ownership of intellectual property and brand assets

From the seller’s perspective, verify that the buyer has the financial capacity and regulatory clearances to take over.

Step 4: Structure the transaction

Next, decide the mode of transfer. The common structures are:

• Share sale: The buyer acquires shares of the franchise-holding company. Simple but may come with legacy liabilities.
• Asset/business transfer: The franchise rights and related assets are transferred to a new entity. Requires fresh contracts and assignments.
• Merger/amalgamation: Involves approval from NCLT and takes longer.

Your structure should factor in tax implications, employee transfers, and compliance costs.

Step 5: Draft and execute the transaction documents

The key documents usually include:

1. Term sheet or MoU
2. Share Purchase Agreement (SPA) or Business Transfer Agreement (BTA)
3. Deed of Assignment for IP
4. Employment contracts or transfer letters
5. Novation agreements for sponsorship, media, and vendor contracts
6. Application for league consent or transfer approval

In most cases, the transaction is subject to league approval as a condition precedent.

Step 6: Obtain league approval and formalisation

Once the league authority grants consent, you proceed to close the transaction. This may involve the submission of final documents to the league and the execution of a revised Franchise Agreement or Deed of Accession.

This may also involve the notification to players, vendors, stakeholders and the public announcement (often coordinated with the league).

Note that the league may impose transfer fees or performance guarantees as a condition of approval.

Step 7: Post-transfer compliances

After the transfer is completed, there are a number of follow-up actions. Starting with the filing of shareholding or directorship changes with the Registrar of Companies. Then you need to complete the trademark assignment filings with the Trade Marks Registry. 

Next will be sending updates to tax, labour, and municipal registrations. Then, notification to broadcasting partners, stadium authorities, and ticketing agencies must be done and lastly. fresh agreements with players or support staff, if required

In short, a franchise transfer is a multi-dimensional exercise, not just a legal one. It requires coordination across legal, regulatory, commercial, and sporting verticals.

Common pitfalls and how to avoid them

Transferring a sports franchise may sound glamorous, especially when media headlines are buzzing, but as someone who has seen deals fall through at the last minute, I can tell you that the devil is always in the details. Let me walk you through the most common pitfalls I have encountered and how you can avoid them.

1. Ignoring the league’s central role

This is the cardinal mistake: treating the franchise as if it were an independent business that can be bought or sold at will.

In truth, you are not just buying a business, you are buying the right to participate in a league, which is conditional and subject to the league’s continuing approval. Many franchise owners have assumed that league approval is a formality. It is not.

How do you avoid it?

Engage with the league at the proposal stage. Involve them in structuring, disclose buyer credentials, and respect their timelines and processes. Think of them as a regulator, not just a contractual counterparty.

2. Ambiguous or restrictive franchise agreements

You would be surprised how many franchise agreements do not clearly define what counts as a “transfer”, “assignment”, or “change in control”. This ambiguity can give the league sweeping discretion to block a deal.

Worse, some agreements include clauses that automatically terminate the franchise upon any change in ownership, even if it is just an internal reorganisation.

So, how to avoid it?

Review the Franchise Agreement thoroughly. If the language is vague or overly restrictive, consider seeking a no-objection certificate or side letter from the league clarifying their stance before proceeding.

3. Incomplete due diligence on liabilities

Sometimes, a franchise has ongoing litigation, pending tax dues, or unresolved player disputes that are not obvious until much later. If you are acquiring the franchise via a share purchase, these liabilities remain with the company and become your problem post-transfer.

To avoid this, you must conduct a comprehensive due diligence, especially around employment disputes and player claims. You must also conduct due diligence, tax assessments and GST filings. 

Also, look into sponsorship or stadium contracts with termination clauses and pending arbitration or disciplinary actions.

Build indemnities into your agreements to protect against undisclosed liabilities.

4. Poor handling of intellectual property

Franchises thrive on brand identity, team names, logos, slogans, and digital presence. Yet, many deals overlook the fact that these assets may not actually be owned by the franchise company.

I have seen cases where the team name was registered in the personal name of a promoter or where the domain name was controlled by a third-party agency. If not addressed, this creates confusion and risk.

How to avoid it?

You need to identify and verify ownership of all IP assets. Execute formal assignment deeds and update the Trade Marks Registry, domain registry, and other platforms. Ensure that you are not just buying rights, but the legal ownership of those rights.

5. Misjudging tax and regulatory implications

Transactions involving foreign parties, cross-border payments, or non-cash consideration often trigger issues under FEMA or income tax law. If these are not addressed in advance, the deal may get delayed or even flagged by regulators.

How to avoid it: Get professional tax and regulatory advice at the structuring stage. Check if prior RBI approval or filings are required. Document the transaction value, consideration, and payment terms with full transparency.

 6. Operational transitions

Even after the legal transfer, the actual transition of the franchise’s day-to-day operations can be chaotic. Stadium lease agreements, vendor relationships, player contracts, and support staff these all need to be handed over smoothly.

How to avoid it?

Plan a formal transition process, with timelines and responsibility matrices. Have both parties jointly notify stakeholders. Maintain continuity for at least one season post-transfer to ensure operational stability.

Transferring a franchise is not just about signing a few documents it is about preserving the sporting identity, fan loyalty, and financial health of the team while ensuring legal compliance. Skipping even one layer of this process can unravel months of effort.

Key takeaways and best practices

If you are still reading, then you probably realise that transferring a sports franchise in India is not for the faint-hearted. But it is also one of the most fascinating kinds of legal transactions where sports, commercial interests, public sentiment, and regulatory governance intersect.

Let me leave you with some key takeaways and best practices to keep in mind:

1. Always start with the franchise agreement

Do not draft a single letter or clause until you have read the franchise agreement from start to finish. Understand what you are allowed to transfer, what conditions apply, and how the league’s discretion is worded. If necessary, involve the league for clarity before you begin.

2. Treat the league as a co-pilot, not an obstacle

The league is not a hurdle to be crossed; it is a co-pilot in this journey. Proactively involving them in the deal not only smoothens the path but also builds goodwill that you will need in the seasons to come.

3. Do your homework twice

Conduct full due diligence, and then do it again. You are not just buying a name, you are inheriting relationships, liabilities, and legacy issues. If you do not uncover them now, they will find you later.

4. Plan your structure strategically

Choose your mode of transfer: share sale, business transfer, or merger based on your risk appetite, tax advice, and league rules. A fancy structure that pleases no one (especially the regulators) is worse than a simple one done right.

5. Lock down your IP

Do not let your brand identity be an afterthought. Whether it is a lion’s head logo, a Punjabi catchphrase, or a viral theme song, if it matters to fans, it matters in law. Ensure all IP is assigned, registered, and updated with the authorities.

6. Keep fans and operations in mind

A franchise does not run on legal paper alone. It runs on coaches, physiotherapists, sponsors, social media teams, and passionate supporters. Ensure a smooth operational transition that respects the spirit of the team and the expectations of its community.

7. Be transparent and document everything

From league approvals to financial valuations, document every aspect of the deal. Keep clear records of communications, applications, and consents. This is not just good legal practice, it is your defence if things are challenged in future.

Transferring a sports franchise is a rare legal transaction that is part business deal, part regulatory exercise, and part emotional legacy. If you navigate it with diligence, respect, and foresight, it can be the start of a remarkable new chapter for you, for the team, and for the sport.

FAQs

1. What role do players play in the franchise transfer process?

Players typically do not have a direct role in the legal or contractual aspects of a franchise transfer, as their contracts are with the franchise entity, which remains bound by the league’s rules post-transfer. However, players must be notified of the transfer, and their contracts may need to be novated or reaffirmed with the new entity, especially if the transfer involves an asset sale rather than a share sale. League rules, such as those in the IPL or ISL, often require continuity in player obligations, and players’ consent may be needed if their contracts include specific clauses about ownership changes. Engaging with players early ensures a smooth transition and maintains team morale.

2. How does a franchise transfer impact existing sponsorship agreements?

Sponsorship agreements are typically tied to the franchise entity and may require novation or renegotiation during a transfer, especially in an asset sale where the franchise rights move to a new entity. Sponsors must be notified, and their consent may be required if the agreement includes clauses restricting assignment. The new owner must ensure that sponsorship obligations (e.g., branding, deliverables) are met to avoid disputes. Leagues may also have guidelines on how sponsorships are handled during transfers to protect commercial interests.

3. Are there any specific tax benefits or exemptions for sports franchise transfers in India?

There are no specific tax benefits or exemptions exclusively for sports franchise transfers under the Income Tax Act, 1961, or GST laws. However, structuring the transfer strategically (e.g., as a share sale vs. asset sale) can optimise tax outcomes. For instance, a share sale may attract capital gains tax, while an asset transfer could involve GST or stamp duty. Consulting a tax professional to assess the transaction structure and leverage general exemptions (e.g., for slump sales under certain conditions) is advisable.

4. Can a franchise transfer be challenged by fans or stakeholders legally?

Fans or stakeholders generally lack legal standing to challenge a franchise transfer unless they can demonstrate direct harm (e.g., as shareholders or creditors of the franchise entity). However, in rare cases, public interest litigation (PIL) could be filed if the transfer violates regulatory norms or public trust (e.g., allegations of corruption). Such challenges are uncommon and typically require substantial evidence. Engaging stakeholders transparently can mitigate the risks of such disputes.

5. How does a franchise transfer affect the team’s fan base and community engagement?

While not a legal issue, a franchise transfer can impact fan loyalty and community engagement, especially if it involves rebranding or relocation. The new owner should maintain continuity in team identity (e.g., colours, logos) and engage with fans through communication campaigns to preserve goodwill. Leagues may encourage or require fan engagement strategies to ensure the franchise retains its market value and community ties post-transfer.

6. What happens if the league rejects a proposed franchise transfer?

If the league (e.g., BCCI for IPL or FSDL for ISL) rejects a proposed transfer, the transaction cannot proceed unless the rejection is overturned through negotiation, arbitration, or litigation. The franchise agreement typically grants the league significant discretion, and rejections may stem from concerns about the buyer’s financial stability, compliance history, or alignment with league objectives. Parties can address the league’s concerns, revise the proposal, or seek dispute resolution as per the franchise agreement’s arbitration clause.

7. Are there restrictions on transferring a franchise to a non-resident Indian (NRI) or overseas citizen of India (OCI)?

Transfers to NRIs or OCIs are subject to the same Foreign Exchange Management Act, 1999 (FEMA) regulations as foreign entities, but NRIs/OCIs may benefit from certain relaxations under RBI guidelines. For example, NRIs can invest in Indian companies under the automatic route for most sectors, including sports franchises, subject to pricing guidelines and reporting requirements. The league’s approval remains mandatory, and the NRI/OCI buyer must comply with the league’s due diligence and financial criteria.

8. How long does the franchise transfer process typically take?

The timeline varies depending on the complexity of the transaction, league approval processes, and regulatory compliance. A straightforward share sale with league consent might take 3–6 months, while an asset transfer or merger requiring NCLT approval could take 6–12 months or more. Early engagement with the league and thorough due diligence can expedite the process, but delays may occur if regulatory approvals (e.g., RBI, CCI) are needed.

9. Can a franchise be transferred to a consortium or group of investors?

Yes, a franchise can be transferred to a consortium, provided the league approves the ownership structure and the lead entity (e.g., a company or LLP) meets the league’s eligibility criteria. The franchise agreement may require the consortium to designate a single entity as the franchisee for operational clarity. Due diligence on all consortium members’ financial and compliance backgrounds is critical to secure league approval.

10. What role do state-specific regulations play in franchise transfers?

State-specific regulations may apply if the franchise operates facilities (e.g., stadiums) or has tax registrations in a particular state. For example, stamp duty on asset transfers or property leases varies by state under the Indian Stamp Act, 1899 (or state-specific amendments). Local labour laws may also affect the transfer of support staff. The franchise’s legal team must review state-specific compliance requirements, especially if the team relocates to a new state.