Overview of Asset Purchase Agreement


What is this document?

This is an agreement between a vendor/seller and a purchaser which sets out the terms and conditions relating to the purchase and sale of a company’s assets.


When would I use this document?

This document can be used when a corporation sells all or some of its assets.


Who signs this document?

This document is signed by the vendor/seller and the purchaser. If signing on behalf of a corporation this should be someone who has authority to bind the corporation.


More details about this document

An Asset Purchase Agreement can be used to buy/sell all or a portion of the assets of the corporation. The agreement will specify which assets. Often the purchaser will require satisfactory due diligence as a condition to the closing of the transaction.

This agreement differs from a Share Purchase Agreement, which can be used to acquire ownership of the corporation itself. The Asset Purchase Agreement does not transfer ownership of the corporation, but only in the assets specified.

This document will often contain many representations and warranties from both the vendor and the purchaser such as the right to title, right to assign, no encumbrances, corporate authorization and no litigation.

If the transaction is subject to the laws of a jurisdiction with a Bulk Sales Act, parties should consider whether the Bulk Sales Act applies to the transaction. Courts have held that parties to an Asset Purchase Agreement cannot agree to “waive” the provisions of a Bulk Sales Act.


What are the core elements of this document?

The core elements of an Asset Purchase Agreement include: List of Assets, Purchase Price, Due Diligence, Indemnity, Limitation of Liability, Vendor and Purchase Representations and Warranties.

Additional clauses may include: Non-competition, Non-solicitation, Taxes, Shipping, Currency, and Inspection.


Related Documents

Bill of Sale – A Bill of Sale is a legal document that records that the seller sold specific property on a specific date to the buyer. It is proof that the property was transferred from the seller to the buyer.

Nondisclosure/Confidentiality Agreement – an agreement that protects confidential information.

Intellectual Property Transfer, Assignment and Release – an agreement that transfers the intellectual property from one person to another eg. from a consultant/contractor or employee to the person who ‘hired’ the consultant/contractor or employee.

Receipt of Payment and Release of Obligations – once final payment has been made for the shares the seller can sign this document acknowledging full payment and releasing the purchaser from claims by the seller.

Promissory Note – a written promise to pay used to provide security for payment.

Term Sheet – a document that sets out the basic elements of the transaction or investment.


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