A Purchase Sale of Asset Agreements is a contract between the purchaser and seller that obligates the purchaser to buy and the seller to sell assets or shares of a corporation subject to the terms and conditions in the APS. It will include terms such as the purchase price, representations and warranties, conditions, and the closing date. An Asset Purchase Agreement, is when a purchaser is buying assets and a Share Purchase Agreement is when the purchaser is buying shares. An APS can be prepared by the parties themselves, real estate agents and or brokers. However, lawyers are left to review and negotiate the details, before any signing from the parties. Closing date often occurs 30 to 60 days  after APS has been signed. 

     In most APS, the completion of the transaction is conditional upon the satisfaction of certain conditions or the parties waiving such conditions. In addition, Lawyers will work with clients to assist them with conditions and prepare to negotiate the closing documents. The three conditions that apply to this factor are, Due Diligence, Financing and Landlord’s Consent.

     Financial due diligence involves reviewing financial statements of the target business to ensure that it is a viable business and the financial position of the business justifies the purchase price. The purpose of legal due diligence is to assess the risks and obligations of the business. For Financing, transactions will often be conditional on the purchaser securing financing on satisfactory terms and conditions and lastly, Landlord’s Consent is if the business operates out of a leased premises, parties will be required to obtain landlord’s consent.

 

 If the transaction is structured as an asset sale, the landlord will have to consent to assigning the existing lease to the purchaser. Once all the conditions have been satisfied or waived, the transaction is now considered firm, the lawyers will prepare and negotiate all of the closing documents required to legally effect the transfer of the business.

    To conclude, a Purchase of Sale of Assets Agreement is important because it determines what a purchaser or seller is entitled to. If an agreement is drafted poorly, a party may lose their rights to their assets, while the other party benefits from it.

SAM LAW specializes in purchase and sale agreements in Canada and the U.S. If you are looking for help in ensuring you have a solid agreement, please schedule a consultation using the button below today.