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Both vendors and purchasers have a strong interest in ensuring that the ownership of all liabilities has been clearly allocated by the APA. The parties should address the question: If the liabilities assumed (or excluded) have been listed, what is to be presumed about the liabilities which have not been listed? Are they to be included (pro-vendor) or excluded (pro-purchaser) from the assets transferred by the APA?

This article explains buyer and seller strategies with respect to liabilities. When drafting an asset purchase agreement, the buyer will likely negotiate for narrow assumed liability and broad excluded liability. That is they will only agree to assume liability in certain circumstances and will exclude liability broadly to include all liabilities other than those expressly assumed by the buyer. The seller on the other hand wants the buyer to assume as many liabilities as possible so broader assumption language favours the seller.

Read the article here.

Take away:

  • Parties should clearly identify which party will be responsible for unlisted liabilities.

 

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