Dwyer Durack have extensive experience in negotiating and drafting the sale/purchase of business agreements.
When a business is sold, it is usually structured as one of two types of transaction:
- an asset sale; or
- a share sale
An asset sale is where only the assets of the business are sold, with the seller retaining ownership of the business entity and company structure (ie. company shares). The seller will also continue to be liable for any associated debts relating to the business entity.
Assets normally include the plant, equipment, inventory, property, company name, intellectual property and goodwill.
A share sale is where the buyer purchases shares in a business’s legal entity (company), rather than just the assets. In a share sale the purchaser may purchase a minority shareholding or the entire shareholding in a company. Generally, a purchase through a share sale is more complex and involves a greater risk when compared to an asset sales. Therefore a share sale should require greater due diligence to be done by the purchaser to make sure the business/company contains no nasty surprises down the track (ie. taxation implications).
Various commercial and legal considerations will determine whether a transaction should be structured as an asset sale or share sale. Each type has its advantages and disadvantages.
It is vital to understand the commercial and legal risks associated with each transaction in order select the correct structure for your transaction. If you need advice or an agreement drafted with respect to a purchase or sale of business, call us today so that we can help you.