21 Feb Asset Purchase Agreement

Asset Purchase Agreement

An Asset Purchase Agreement is an agreement between a buyer and seller that transfers assets from the seller to the buyer. Asset Purchase Agreements can be used to accomplish the sale of an entire business if the agreement addresses all or substantially all of the assets of a business. An Asset Purchase Agreement typically requires the seller and the buyer to make representations and warranties regarding their ability to consummate the purchase and enter into the agreement. There may be some additional representations and warranties made by the seller regarding its ownership of the assets, the existence of liens, encumbrances and security interests in the assets, and other general information about the business being sold. A key point of negotiation of an Asset Purchase Agreement is whether the buyer will assume any liabilities of the business associated with the purchased assets. If there are limitations on the liabilities assumed by the buyer, the buyer will want to ensure seller is responsible for unassumed liabilities after the sale is completed. The Asset Purchase Agreement can provide that seller indemnifies buyer for any unassumed liabilities that are asserted against buyer. Buyer may seek to bind seller to a contractual obligation to remain capitalized or may seek a guaranty by the seller’s ownership to cover the unassumed liabilities.