Asset Purchase and Sale Agreement

When considering an asset purchase agreement to formalize the sale of a business or asset, you should consider the pros and cons before deciding to use this type of document. Check the pros and cons below. Debt is also the subject of price negotiations; If the assets are loans, buyers and sellers must decide who is responsible. You have to decide whether you want to pay in shares or accept the securities as such. Another option is to decide whether the buyer should make payments in instalments or in one lump sum. In-house lawyers are the lawyers best placed to draft a securities purchase agreement. If they are licensed in your state, they can provide legal advice, assistance, and advice regarding decisions, structuring agreements, and protecting your legal rights during the transaction. A model purchase contract is a contract for the purchase and sale of assets of a company. These can be tangible assets such as furniture, accessories or real estate, as well as intangible assets such as accounts payable or a customer database. The asset purchase agreement can detail the conditions of purchase, escrow conditions and price. The asset inventory can also be listed here. The seller and the buyer accept certain conditions in a purchase contract.

In the event that there are liabilities that the buyer does not include in the purchase, the parties must ensure that the purchase is not made for less than the fair value of the assets and that the company remains sufficiently capitalized after the sale to pay its debts and liabilities. Otherwise, the transaction may be considered fraudulent. One of the most important elements that must be included in an agreement is the things that each party relies on in the transaction. Most of them go to the “Representations and Warranties” section and cover topics such as warranties regarding the suitability of the product for a particular purpose, the condition or quality of the items sold, and the legal status of the parties entering into the contract. If the business is purchased “as a current business”, VAT can be ignored as long as both parties are subject to VAT. There will be a VAT clause in the agreement. The main difference with an asset purchase is that a buyer only gets ownership of the asset without any liabilities. In a share purchase agreement, the buyer assumes ownership of all assets and liabilities of the company. The correct identification of the parties to the agreement is essential, especially for companies that may have several independent subdivisions. It is important to correctly identify the company entering into the agreement.

A capital asset is classified by the IRS (page 20) as follows: An asset purchase agreement must achieve several objectives. First, the agreement describes the assets to be acquired. As mentioned earlier, specificity and exclusions are important if a company does not want to sell all its assets. Secondly, the document must set out the conditions for the movement of goods and set out the rights and obligations of both parties. In addition, there may be significant contracts that are not transferable, or some licenses and consents may be unique to the seller. Sometimes a buyer wants to maintain as many customer relationships as possible and therefore may choose to buy stocks rather than assets. The Ordinance on Transfers of Undertakings (for the Protection of Employment) (“TUPE”) protects the rights of workers when transferring assets from an undertaking. The basic principle of TUPE is that when a seller buys the company`s assets as a “continuous operation”, it is assumed that the employees working in that company are automatically transferred to the buyer. On this basis, the buyer and seller should contact each other at an early stage to inform and consult with the relevant employees.

The main advantage of an asset purchase is that a buyer can choose the assets and liabilities they want to acquire. The risk of hidden liabilities is generally lower than with a share purchase. If, in a purchase transaction, a contract is considered to be fundamentally important to the business, the buyer may insist that the completion of the business transfer depends on the novation of the contract. In this case, you can use a novation agreement to ensure that all three parties agree to this change. Whether you want to buy or sell an existing business or its assets, you need to control the transaction with an asset purchase agreement. Depending on the details of the transaction, the length of your document will vary. However, the basic structure of a securities purchase agreement is similar, regardless of the details. Here are the 6 most important elements that must be included in this agreement. Be sure to include everyone, whether you`re a buyer or a seller. You want to protect your interests at every stage of the agreement. A good purchase agreement clearly identifies buyers and sellers. Then, the persons or ministries concerned are indicated.

Often, a seller requires a down payment to reserve the purchased assets. This is especially true for expensive sales. In section “V. Deposit”, one of the checkboxes displayed must be checked to set the status of the seller`s filing request. If no deposit is required for the next step, check the box for the declaration “A deposit from the buyer is not required”. If a deposit is required for this purchase to proceed to the next step, check the box “A deposit is required…” and enter the dollar amount required for the deposit in the blank line provided. This also requires further definition. A deposit is considered “non-refundable” or “refundable”. If a deposit is required but the buyer is not entitled to a return if the sale is cancelled, check the “Non-refundable” box.

The only exception to this option is if the assets to be acquired were damaged or lost value after the inspection and the initial value was determined. If the assets covered by this Agreement are “Refundable”, check the second box after the instruction “A deposit is required. If this item is selected, it will show that the buyer is entitled to a refund of his deposit in case of termination of this sale without advancement. .