6th February 2025
Are you considering buying or selling a business? If so, one of the documents you may encounter is the Asset Purchase Agreement (APA).
At Myers & Co, we understand that navigating this complex document can be daunting. That’s why we’re here to break down its purpose and key provisions.
Joanna Convey, Commercial Solicitor at Myers & Co, explains what you need to know about Asset Purchase Agreements.
An APA sets out the terms and conditions for buying and selling business assets, providing a clear, legally binding structure for the transaction. Here’s what an APA aims to achieve:
Understanding the main provisions of an APA is essential for a successful transaction. Here’s a closer look at what these provisions typically include:
This clause defines key terms used throughout the APA, ensuring clarity and consistency.
If certain conditions (such as regulatory approvals) must be met before the transaction can be completed, the APA will specify these and outline the responsibilities of each party.
This section details the total purchase price and payment requirements. It also outlines the structure of payments, such as instalment plans.
The APA provides comprehensive detail about the assets being bought and sold, as well as any excluded assets to avoid confusion. It ensures that both parties have a clear understanding of what is included in the transaction avoiding potential disputes down the line.
Each party must comply with specific obligations upon completion. For the seller, this might include delivering documents and assets to the buyer; for the buyer, it means fulfilling any payment obligations.
The APA includes warranties (contractual statements) that the seller makes about the business and its assets. If any warranty is found to be untrue, the seller could face a breach of warranty claim.
Sellers often include limitations to reduce their liability for potential claims, such as breach of warranty claims. These limitations might involve capping the total liability amount, specifying a time frame within which claims can be made, or excluding certain types of damages. Additionally, this section may detail procedures for notifying the seller of any claims and resolving disputes.
These are promises, usually made by the seller, to take or refrain from taking certain actions after the transaction. For example, the seller might agree not to compete with the business or poach the employees of the business for a certain period of time.
This section of the APA will address whether the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) applies, which could result in employees automatically transferring to the buyer.
TUPE ensures that an employee’s employment terms and conditions are preserved when a business is transferred to a new owner.
This section specifies how advanced payments and prepayments made by or to the business before completion are handled. If the parties cannot agree, an expert may be appointed to determine the correct amounts.
This clause establishes the legal jurisdiction governing the agreement and the methods for resolving any disputes that might arise. It ensures that any legal matters are handled in a systematic and agreed-upon manner.
Understanding the purpose and main provisions of an APA will help you navigate your transaction with confidence. At Myers & Co, we’re here to support you every step of the way. Our experienced team can assist you with drafting and reviewing the agreement to ensure that all relevant aspects are covered comprehensively.
For further information, please contact Jo Convey on 01782 525029 or email her at joanna.convey@myerssolicitors.co.uk. Myers & Co has offices in Stoke-on-Trent, Staffordshire.
