The main advantage of an asset purchase is that a buyer can choose the assets and liabilities they want to acquire. The risk of hidden liabilities is usually lower than that of a share purchase. A buyer will normally prefer to buy the assets of a company, while the seller prefers to sell the shares. This is because an asset purchase allows a buyer to precisely choose the assets they buy and precisely identify the liabilities they want to take over. In addition, there may be significant contracts that are not transferable, or some licenses and consents may be unique to the seller. Sometimes a buyer wants to get maximum customer relationships and can therefore choose to buy shares unlike assets. An asset purchase allows buyers to spread the purchase price among the assets to reflect their market value. This allows for greater depreciation, resulting in future tax savings. The oil and gas industry does not distinguish between an asset and a share purchase when designating the associated sales contract.
In this sector, whether it is a purchase of assets or shares, the final agreement is called a purchase and sale agreement (PSA). The Business Transition Regulation (”TUPE”) protects workers` rights to transfer assets from a company. The basic principle of TUPE is that when a seller buys the assets of the company as a ”renewed company”, the employees involved in this activity are automatically transferred to the buyer. Based on this, buyers and sellers must intervene at an early stage to inform and consult with relevant employees. In addition to the flexibility to sell only certain assets and not the entire business, asset sale contracts generally contain detailed provisions regarding the transfer of liabilities from the seller. The major disadvantage of an asset sale contract compared to a share purchase agreement is that each property must be transferred in accordance with its correct rules and made enforceable vis-à-vis third parties (e.g. B by consents and authorizations). This applies in particular to customer contracts, as a third party may see the transaction as an opportunity to renegotiate their contract. This could delay the deal and increase transaction costs. Instead of acquiring all the shares of a company and therefore both its assets and liabilities, a buyer will very often prefer to take over only certain assets of a company. As a rule, the company sells the assets itself when buying assets, while in the case of a sale of shares, it is the individual shareholders who are the sellers. If the business is purchased ”as a current business”, VAT can be ignored as long as both parties are recorded on the turnover.
There will be a VAT clause in the agreement. Where there are liabilities that the buyer does not incorporate into the purchase, the parties must ensure that the purchase is not made for less than the fair value of the assets and that the entity remains sufficiently capitalized after the sale to pay its debts and liabilities. Otherwise, the transaction may be considered fraudulent. You can ask a lawyer at any time for advice on the transfer of employees and TUPE as part of a property purchase. In the context of a merger or acquisition transaction, asset sales agreements have a number of advantages and disadvantages compared to the use of an equity (or share purchase) or merger agreement. In the event of a capital acquisition or merger, the buyer receives all the assets of the target enterprise without exception, but automatically assumes all the liabilities of the targeted entity. . . .