Asset purchases

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Asset purchases
  • Nature of the transaction
  • Why an asset purchase?
  • Tax
  • Stamp duty
  • VAT
  • Stages of the transaction
  • Preparing for sale and marketing the business
  • Preliminary agreements
  • Due diligence
  • More...

Asset purchases

A business can be acquired by one of two methods: an asset purchase or a share purchase. The two types of transaction are fundamentally different in their nature and involve very different processes and documents.

Nature of the transaction

Why an asset purchase?

An asset purchase enables the buyer to purchase only those assets and liabilities that it requires and expressly agrees to acquire. When the acquisition is completed, the buyer becomes the owner of those assets and subject to those liabilities, leaving unwanted assets and (more importantly) liabilities behind in the hands of the seller. Asset purchases allow a buyer greater flexibility to pick and choose and largely avoid the risk of it acquiring unwanted liabilities.

Under a share purchase, the buyer acquires ownership of the company which carries on the target business. Save to the extent that any of such company’s contracts and arrangements include ‘change of control’ provisions, the whole of its undertaking, assets, contracts, rights and liabilities remain its property and it can continue to carry on its business essentially unaffected by the share transfer. However, the buyer acquires (albeit indirectly) all the target company’s assets and liabilities, known and unknown.

A transfer of the assets making up the business does not occur automatically. Each asset will have to be individually identified in the purchase agreement and a number of separate ancillary documents are

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