Business Asset Purchase Agreement is an elaborate agreement between the purchaser and the seller, which spells out the terms of purchase of specified assets belonging to a company. The agreement provides crucial specifics regarding the purchase price and the terms of payment.
A formal agreement should have a conventional structure and must be written in a formal language that specifies all the important details with absolute clarity. Encumbrances and liens on the assets are also included in the terms of the agreement. A proper agreement should have a condition precedent for its closing. The names of the parties involved in the agreement must be provided in full.
Here is a checklist of crucial details:
- Specify the Assets. A well drafted Business Asset Purchase Agreement should specify the assets to be purchased or sold to avoid a mix up of details. The idea is to avoid redundant assets and misunderstanding on matters of pricing. You should ensure that the listed assets are understood by both parties to avoid issues and inconveniences that might arise during and after the agreement. The person reading the agreement should easily tell the nature of the assets including size, quantity, and price.
- Clarify the Methods of Payment. Properly written agreements should clarify the payment methods including the dates of payments as agreed by the parties. Some agreements provide for cash payments whereas others specify on hire purchase method. Omitting the payment method in the agreement often leads to disagreements between the parties because of delays and inconsistent transactions. Professionally drafted agreements usually feature a single payment method that is agreed upon by both the buyer and the seller.
- Representation of Authority. In a conventional agreement, the buyer is obliged to represent express authority to purchase the listed assets. In a similar manner, the seller is required to represent express authority to sell the specified assets. You should acknowledge the fact that the representation of authority by both parties reinforces the legality of the agreement. If you are the seller of the asset, you should show proof that the purchase price of the assets is commensurate to its overall value.
- Avoid Informal Language. Always ensure that the language used in the drafting of the agreement is formal and simple. You should avoid informal vocabulary or vague sentences that may be misinterpreted by the parties involved in the agreement. Experts in Business Asset Purchase Agreement writing recommend the use business register when writing the agreement to achieve the element of clarity. You should avoid extraneous details and information that is not applicable to the transaction.
- Maintain the Proper Structure. You should write the agreement in accordance with the conventional structure. The formal structure of writing a Business Asset Purchase Agreement entails a title, names of the parties involved, dates, and the particulars of the transaction. Maintaining the right format and structure enhances the interpretation of the document by the parties and other persons who may be interested in the details. Besides, a well-structured agreement is important for future reference.
References:
American Bar Association. (1992). Business law today: The magazine of the ABA Section of Business Law. Chicago, IL: The Section.
Bradlow, D. D., & Finkelstein, J. G. (2013). Negotiating business transactions: An extended simulation course. New York : Wolters Kluwer Law & Business.
Bureau of National Affairs (Arlington, Va.). (1978). Corporate practice series. Washington, D.C.: Bureau of National Affairs.
Carney, W. J. (2009). Mergers and acquisitions. Austin: Wolters Kluwer Law & Business.
Grunau, B. (2009). Own your future: Straight talk about how to buy a business and build your future. S.l.: Iuniverse Inc.