General issues

Choice of structure (share or asset purchase)

A business may be acquired by way of share purchase or asset purchase. Under an asset purchase, the buyer selects the assets and liabilities it wishes to acquire from the seller (explicitly excluding those which it does not wish to acquire) and purchases them, together with the business in which those assets are used (the target business). It does not acquire the company carrying on the target business. An asset purchase is therefore also commonly known as a 'business purchase'. Under a share purchase, the buyer takes over ownership of the company carrying on the business (the target company), which comes with all of its assets, obligations and liabilities (whether or not the buyer was aware of them).

A decision to proceed by way of asset purchase rather than share purchase will be influenced by an assessment of several factors, including:

1. •

   the nature and quantity of assets employed in the target business

2. •

   any difficulties associated with acquiring key assets individually (eg where third party consents may be required)

3. •

   the liabilities of the target company, and

4. •

   the tax treatment