The seller and buyer (and any guarantor) will enter into an asset purchase agreement, which can become a detailed and heavily negotiated agreement. This sets out the terms on which the sale is to take place, including:
purchase price and payment mechanism, including any provision for deferred (or ‘earn-out’) consideration, payment by way of share consideration and any security or guarantee provisions for the protection of payment of any deferred consideration
conditions precedent to completion, such as regulatory or third party approvals, and the release of bank security over assets used in the target business
arrangements for completion, including executing and handing over ancillary documents (such as assignments, transfer documents and a transitional services agreement)
post-completion restrictions (by way of covenant) on the seller's activities
warranties and indemnities, providing the buyer with recourse against the seller if untrue and inaccurate statements are made with respect to the target business's affairs, and
limitations on the seller’s liability, including time limits for making warranty and indemnity claims and financial limits and thresholds
See Practice Notes:
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