Corporate
Asset Purchase Agreement
Texas
How does an asset purchase agreement work with debt?
I am buying a business and want to use an asset purchase agreement based on what I've read, but I believe the company has debt. How does this work? Will I also be buying the debt? Any help is appreciated
2 Attorney answers
Answer
Corporate
Texas
Michael S.
ContractsCounsel verified
Good morning. With the caveat that I am a Pennsylvania attorney, as the buyer, you do want to buy the assets and not the company. The drafting of the purchase agreement is critical, ensuring that you are not responsible for existing debt. You will also want to obtain an indemnification from the seller, to make sure you are protected in case any of the creditors come after you. Obviously, the details of the deal may complicate things, but that is the gist.
Answer
Acquisitions
Texas
Steven C.
ContractsCounsel verified
It depends. If you want to use an asset purchase agreement to purchase just the assets of the company instead of the entire company, then an asset purchase agreement is the way to go as you could avoid taking on the company's existing debts. However, if you plan to buy the business as a whole I would expect you will inherit the debts as well unless you draft a release from the former owners.
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