An asset purchase agreement, also known as an asset sale agreement, business purchase agreement, or APA, is a written legal instrument that formalizes the purchase of a business or significant business asset. It details the structure of the deal, price, limitations, and warranties.
Due to the legal and financial implications associated with an asset purchase agreement, hire corporate lawyers to help you draft this critical document, or negotiate your deal. They will ensure that your agreement is fair and enforceable under the law.
An asset purchase is when a buyer agrees to purchase certain assets - and sometimes liabilities - from a company. While a buyer in an asset purchase is typically more focused on the assets they are buying, they can also acquire the liabilities of the business in some circumstances. Because of this, the buyer inherits the benefits and risks associated with the acquired assets or business.
Asset purchases can include the buying of:
In this provision, you should describe what the seller is selling to the buyer as well as any exclusions that apply. Detail the structure of the deal, including price, payment terms, and liabilities the buyer assumes. Since this section may be lengthy, it is not uncommon to shift long lists to an attachment.
Closing is when the transaction is formalized. The closing terms should define what is required to complete the business or business asset’s purchase or sell, including any terms and contingencies.
There are promises that both parties will likely make to each other. Warranties are the representations associated with the purchase. If the seller makes unfounded guarantees, this section is critical for the buyer to pursue legal redress.
Covenants are sub-agreements under the asset purchase agreement. For instance, the seller may promise to not compete with the buyer for a specific period in a geographic location. Depending upon the transaction, the covenants will vary widely.
Indemnification protects buyers and sellers in the event of a legal dispute. It describes the financial damages that one party pays to the prevailing party and under what circumstances, including attorneys’ fees, court costs, and more.
There are numerous bodies of law that may apply to contracts. Your asset purchase agreement should indicate which state, country, or international laws govern your contract for legality purposes or in case a dispute arises.
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