A Brief Introduction About the Asset Purchase Agreement
An asset purchase agreement is a legal document that is created between two organizations and or companies when either of them is purchasing assets from the other. This agreement is also known as an APA is a definitive agreement that aims to finalize all the terms and conditions along with the rules and regulations that need to be followed, when it comes to the purchase and sale of a company’s assets. One of the crucial aspects to keep in mind here is the fact that an APA is vastly different from a SPA or Stock Purchase Agreement which includes the purchase of company shares, including the title to assets as well as liabilities.
Who Takes the Asset Purchase Agreement – People Involved
In the creation of an Asset Purchase Agreement, there are usually two or more parties involved. The first party is the company and or organization that is purchasing the assets from the company and or organization. The second party is the company and or organization that is selling the assets. In legal terminology, the first party is known as the Purchase, the second party is known as the Seller and the legal document is simply referred to as the Agreement.
One of the most interesting aspects that makes an asset purchase agreement so unique is the fact that it clearly segregates the assets being bought and those being excluded from the sale and or purchase.
Purpose of the Asset Purchase Agreement – Why Do You Need It
The main purpose of this agreement is to establish a legal understanding between both the organizations and to make sure that the interests of the individual parties along with the collective are protected at all points in time.
Contents of the Asset Purchase Agreement – Inclusions
- Involved Parties: There are mainly two parties involved; the primary being the party who wants to purchase the said assets from the company or organization, and the second being the company and organization who is selling its shares to a company and or individual. In legal terminology, the first party is referred to as the Purchaser and the second party is referred to as Seller and the legal contract is simply referred to as the Agreement.
- Effective Date: This section of the agreement outlines the date from which this contract will stand legally binding and also the date on which the same can be dissolved.
- Application: This agreement is applicable in the state, city, or county where it was originally drawn at.
How to Draft the Asset Purchase Agreement
An Asset Purchase Agreement can be drafted by simply following the steps mentioned below.
Organize a meeting both the parties and discuss upon the terms and conditions of the agreement, such as the assets that will be included in the sale and those that will be excluded, the total valuation of all the assets, the amount of funds that will be allocated for the purchase of these assets, the form of payment along with payment structure that will be followed, among other finer details of the transaction.
After the two parties mutually agree to the conditions of the agreement they can consult a lawyer and draw this agreement according to the requirements and specifications.
Both the parties need to sign the documents in front of the law after the agreement is drawn.
While negotiating the formation of an asset purchase agreement it must be taken care that the individual interests of both parties must be addressed along with the collective cause.
Benefits of the Asset Purchase Agreement
The most significant benefits of having this agreement are as follows.
- The contract clearly mentions the responsibilities, obligations and limitations and hence makes sure that both parties are well aware of them at all points in time.
- This is document acts as legal proof and thus can be produced in court if there is a need in the future.
- In the absence of an Asset Purchase Agreement, neither of the parties have legal proof of an understanding taking place between two entities and thus if the matter is ever brought to court, both parties stand to lose.
What Happens in Case of Violation
In the case of violation of an asset purchase agreement, certain remedies come into effect and in a few cases the contract is dissolved and a new set of terms and conditions are agreed upon.
An asset purchase agreement is created with the thought of initiating a smooth and efficient transaction between two parties and to make sure that both are mutually profited from the transaction. Thus it is always advised that both parties create this agreement when such a sale is concerned.
Sample Asset purchase agreement
A sample of the agreement can be downloaded from below.
Download this USA Attorney made Original Agreement for only $9.99
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This agreement is made between the Seller and the Purchaser on the effective date of 10th November, 2011.
Seller represented by
Mr. Peter Johnson
Address: 33501 S Dixie Hwy, Florida City, FL 33034
Contact number: (305) 242-4447
Purchaser represented by:
Ms. Stacie Grant
Address: 2100 88Th St, North Bergen, NJ 07047
Contact number: (201) 758-2810
Terms and Conditions:
- Subject to the provisions of this Asset Purchase Agreement, Purchaser agrees to purchase, and Seller agrees to sell, all Seller’s title, rights, and interest, if any, in and to the Purchased Assets where the Purchased Assets is “Retailer Business”. The purchase price for the Purchased Assets shall be $112,000 (“Purchase Price”).
- Purchaser shall deliver to Seller the purchase price of the assets by certified or bank check for $112,000
- At Closing, Purchaser shall assume and agree to pay, perform or discharge as appropriate only the Assumed liabilities and obligations
- Seller hereby covenants and agrees with Purchaser that until the Closing, Seller shall make no sale of assets other than those in the ordinary course of Seller’s past practice.
- At the Closing, Seller shall deliver the Purchased Assets to Purchaser and shall deliver the following documents to Purchaser: an Assignee’s Bill of Sale, an Assignment, Acceptance and Assumption Agreement, List of Accounts, List of Inventory, Closing statement, and such other documents as may be reasonably requested by Purchaser.
This Asset Purchase Agreement shall be active when the parties “Seller” and “Purchaser” set their seals as on the date 11/10/2011 (MM/DD/YY).
SIGNED FOR AND ON BEHALF OF SELLER BY:
SIGNED FOR AND ON BEHALF OF PURCHASER BY: