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Table of Contents
An Asset purchase agreement is also known as APA or Business purchase agreement. An asset purchase agreement (APA) is basically an agreement incorporated between a buyer and a seller which sets out the terms and conditions relating to the purchase and sale of the assets of a company.
Through an asset purchase agreement, any buyer can purchase that can either be tangible or intangible (and liabilities) from the seller for any amount of consideration to be paid in cash or any other way.
Assets that can be transferred through an Asset purchase agreement are:
While executing a perfect APA it is foremost to figure out what the buyer and seller what from such agreement. Only after figuring out all the minute details a good Asset Purchase Agreement can be drafted. As it is a very technical task, it is recommended to appoint professionals for executing a well crafted APA.
A Stock Purchase Agreement (SPA) is executed between the buyer and seller for sale of shares of any company. Under an SPA the ownership of any company is transferred from one party to another.
The major difference between a stock purchase agreement and APA is that in the previous one no itemization is required. However, on the other hand, Asset Purchase Agreement are much complex in nature. Under APA there are potential rewards as well as substantial risk for both the parties under the contract. Unlike simple transfer of ownership as the case with SPA, it entails the legal mechanism required for execution of a corporate merger or acquisition. When an SPA is executed along with the ownership assets and liabilities of the business are automatically transferred to the buyer. However, if the buyer only intends to take over a part of assets and liabilities then Asset Purchase Agreement will be executed.
Another major difference between SPA and APA is that in case of Stock Purchase Agreement the seller will be the Shareholder. And on the other hand in case of Assent Purchase Agreement, the will be the Company which is legally the owner of the assets in consideration.
As we have discussed earlier while executing an Asset Purchase Agreement all the relevant and minute details, considerations, and concerns of both the parties must be kept in mind. All such details must be listed out beforehand and only after that an agreement incorporating all of them must be drafted and executed.
Any asset purchase must include all the relevant information including:
Let’s discuss these important components of an Asset Purchase Agreement a little in detail.
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