The Asset Purchase Agreement

Checklists are extremely helpful in commercial transactions. Refer to the Law Society’s Asset Purchase Agreement Drafting checklist.

Appendix D is a sample asset purchase agreement.

Note the assumption that statutory lien searches are concluded and the results have been reviewed. Whether or not all the search results have been received, it is always desirable to negotiate a holdback of a portion of the purchase price for a period of time (a minimum of 30 to 60 days) pending the return of the searches and to permit the purchaser to determine whether or not any undisclosed liabilities or misrepresentations exist and, if so, to adjust the purchase price as necessary. Where the purchase price is based upon assumptions regarding future cash flow or profitability, the amount of the holdback needs to allow for the potential impact on the purchase price if cash flow is less than projected, etc.