Selling a Business – Asset Sale

Deciding What Will Be Sold

An asset sale may include some or all of the assets used by the business, such as:

• equipment, machinery and vehicles;
• stock and work in progress;
• business names and goodwill;intellectual property;
• customer and supplier contracts;
• licences and permits;
• business premises or leasehold interests;
• databases and business records; and
• employees connected with the business.

The sale agreement should identify the assets being transferred, any excluded assets and the liabilities that the buyer has agreed to assume. It should also deal with the purchase price, payment arrangements and how the business will operate during the period leading up to completion.

Transferring Contracts and Business Assets

Unlike a share sale, the assets and arrangements required to operate the business may need to be transferred individually. Contracts might need to be assigned or replaced, and the consent of customers, suppliers, landlords, lenders or regulatory bodies may be required.

Intellectual property may need to be formally assigned, while arrangements may also be required for the transfer of business records, customer information, domain names, telephone numbers and other operational assets.

Identifying these requirements early can help avoid delays and ensure that the buyer receives everything needed to continue the acquired business.

Employees and TUPE

Where a business or part of a business transfers to a new owner, the TUPE regulations may apply. This can result in employees transferring to the buyer with their existing employment rights and continuity of service preserved.

Both parties may have obligations relating to employee information and consultation. We can help you identify the relevant requirements, prepare the necessary documentation and work with the buyer to address employee arrangements within the asset sale agreement.

Tax and the Seller’s Continuing Responsibilities

An asset sale can have important tax and accounting consequences. Depending on the circumstances, the transaction may qualify as the transfer of a business as a going concern for VAT purposes. The allocation of the purchase price between different assets may also be important.

You should obtain appropriate tax advice at an early stage. We can work alongside your accountants and tax advisers to ensure that the legal documentation reflects the agreed tax treatment.

Because the seller’s company or other legal entity remains in existence, you will also need to consider what happens to any assets, liabilities, contracts or obligations that are not included in the sale.

If you intend to sell the company itself rather than selected business assets, please see our Selling a Business – Share Sale service.