The 6 Most Important Elements of an Asset Purchase Agreement

When it comes to asset purchase agreements, the more information and details are included, the better. This is because the asset purchase agreement serves multiple purposes, including:

  • Describing the assets to be purchased
  • Setting forth the terms under which the goods are transferred
  • Laying out the rights and responsibilities of both parties

Here are the 6 most important elements that need to go into this agreement:

1) Who? The correct identification of the parties to the agreement is fundamental. Especially with corporate entities that may have multiple related yet independent subdivisions, it is crucial to correctly identify the entity that is entering into the agreement.

2) What? While it may seem obvious that the thing that is being purchased is identified, the key here is to be as specific and descriptive as possible. For land, this means providing the exact description of the lot as it is listed in the land records. For a business, it means a list of every piece of equipment that is included down to the two chairs in the back office. For services, it means providing details on the nature of the services and what is and is not included in those services. And much, much more. In fact, the more details, the better.

3) How much? Price is of course an essential element in the agreement, but just as important are the terms on how it will be paid. For example, if the transaction is one involving seller financing, the buyer may remit a portion of the purchase price at closing and simultaneously sign a promissory note for the remainder of the purchase price.  

4) Representation and warranties: One of the most important things that needs to be in an agreement are the things that either party is relying on as part of the transaction. Most of these go in the representation and warranties section, and cover such topics as warranties as to the fitness of the product for a particular purpose, the condition or quality of the items being sold, and the legal status of the parties entering into the agreement.

5) What needs to happen before closing: The conditions—or requirements—for closing to occur can vary depending upon the transaction. Typically, however, those requirements include delivery of the purchase price, approval of the sale by whatever third parties need to be involved including government agencies, and if the seller needed to make any changes or repairs prior to sale.

6) Miscellaneous: This is often referred to as “boilerplate” language, but it is important nonetheless. In this section, it is important to specify which state’s laws will govern the agreement (choice of laws), that if any part of the agreement is deemed void the remainder of the agreement will remain valid, and how modifications or amendments to the agreement can me made.

The first and most important step towards a successful agreement is to have it negotiated and drafted by a competent and knowledgeable attorney. The attorneys at Trembly Law have helped many other businesses and individuals navigate the asset purchase process while securing and protecting their interests. Contact our office today to get started.

Share this on...Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Email this to someone

Written by Brett Trembly

Brett Trembly

In the South Florida legal community, Brett sits on the Board of the South Miami Kendall Bar Association, the Florida Bar 11th Circuit Grievance Committee, volunteers on the Florida Bar Young Lawyers Division Mentoring Program, the Dade-County Bar Associations Rainmakers Committee, and annually volunteers for Miami-Dade County’s Ethical Governance Day.