Asset Sale Agreement: Everything You Need to Know
An asset sale agreement is necessary for a business as it finalizes the terms and conditions of a sale and purchase of a company's assets.3 min read
An asset sale agreement finalizes the terms and conditions of a sale and purchase of a company's assets. This is necessary for a business if it's ready to purchase a business' assets and want the terms and conditions defined. It's also helpful to have when assets of a business are being sold and the terms of the sale need to be defined.
A purchase agreement template is a contract for the purchase and sale of assets of a company. This could be tangible assets, such as furniture, supplies, or real estate, as well as intangible assets, such as accounts payable or a customer database. The asset purchase agreement can go into detail about purchase conditions, escrow terms, and price. The inventory of the assets can also be listed here. Both the seller and buyer agree to certain terms in an asset purchase agreement.
Simple Asset Sales Agreement
A simple asset sales agreement is used when finishing a transaction where the assets of the company are sold to a buyer. This buyer can purchase all the assets or just a portion of them. The agreement may be as simple as giving the buyer a bill of sale. Sale of trademarks or intellectual property and real estate transfers often need legal assistance and more complex structuring. Even if only some of the assets are being sold, a contract should be in place to list all the details involved.
The contract will state the names of the seller and buyer, as well as saying they both have the rights and power of ownership to be involved in the transaction. If there are stockholders on either party, they should also be mentioned in the contract with a statement that they completely agree with the transaction. The contract should list all details of the transactions and talk about possible scenarios involving the transfer of assets. Any intangible assets should also be listed, including the following:
- Customer names
- Contact information for personnel and vendors who are being transferred in the agreement
Tangible assets can be listed separately or talked about in the agreement. These include office furniture, computers, literature, inventory, phone systems, tools, and fixtures. The terms of the sale and price should be stated in the contract. Specific language should be used in the simple assist sales agreement that talks about the buyer's responsibility for liabilities that may be attached to the assets. If there are outstanding bills with suppliers or vendors, it should be agreed on before the sale closes if the buyer will assume the liabilities.
Any warranties for goods that were shipped must also be listed in the contract, including language talking about how long the company is liable for damage to any goods that have been delivered. Any extra provisions that were attached to a sale need to be clearly defined in the agreement. A certain period of time for closing should be listed, as well as the time and location the parties will meet at to finish the transaction. Any assets that are a part of the business but not be part of from the sale should be listed so there's no confusion over the deal.
Completing an Asset Sale
It can be time-consuming and confusing to sell a business. The main issue to address is what exactly is being bought and sold. It should be differentiated if it's a stock purchase or an asset sale, for example. An asset sale is where the business' assets are transferred to a new owner without the actual ownership of the business being transferred. If assets are being sold to keep the business operations going, businesses can sell fixed assets if they don't have any other value to the company.
Asset Sale Checklist
If the company is having an asset sale, there must be a plan of attack. It's important to document everything during a sale of assets. The Asset Purchase Agreement, Broker or Finder Agreement, and Letter of Intent are often prepared and signed during the preclosing stage. Any contracts that make up the Exhibits to Asset Purchase Agreement are often prepared alongside the Asset Purchase Agreement.
If you need help with an asset sale agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.