ACQ6
Asset Acquisitions (Transferring Assets and Employees)
Transfer of Assets
What should be transferred?
Aim to have a COMPREHENSIVE DEFINITION OF “BUSINESS” to cover all the assets you want
Not unusual to have separate provisions for certain types of assets (e.g. goodwill)
Include a list of assets which are explicitly excluded (if any)
Sometimes a formal transfer of an asset is not possible at completion (e.g. because consent is required by a
3rd party). In these circumstances, the SPA should provide that the SLR will HOLD THE ASSET ON TRUST for the
benefit of the BYR and that the BYR has the right to use the asset pending the formal transfer, so effectively
enabling the entire operation of the target business to transfer.
The assets that are generally considered necessary to continue the running of a target business are:
Customer contracts
Supplier contracts
Hire purchase and leasing agreements
Debts (money owed to the business by customers)
Employees
IP rights
Premises
Motor vehicles
Plant and machinery
Fixtures and fittings
Office furniture and equipment
Stock of raw materials
WIP and finished goods
Investments
Method of transferring individual assets
General considerations
Land and premises Any freehold and leasehold premises which are to be transferred will normally be listed
in a schedule to the sale and purchase agreement
The buyer will assume risk on the premises as from exchange of the agreement and
should take out insurance from this date, or, in the case of leasehold property where the
lease obliges the landlord to insure, have its interest noted on the landlord’s policy
On completion of the acquisition, suitable transfer arrangements will be put in place for
the formal transfer of the premises to the buyer
License to assign
Requesting consent: Leases are assigned using a formal licence to assign
Seller should request consent from landlord to assign as early as possible (as
often considerable delay to obtain)
s.19 LTA 1927 = gives seller redress against a landlord acting unreasonably (where
lease contains covenant not to assign without landlord’s consent, s.19 states that
landlord cannot unreasonably withhold consent)
Guarantees: Landlord will usually want equivalent guarantees from buyer as he had from
the seller
Conditional contract: Acquisition agreement may be conditional on obtaining landlord's
consent if not given by signing
Rare for seller to pass on landlord's cost of license to buyer
1
Asset Acquisitions (Transferring Assets and Employees)
Transfer of Assets
What should be transferred?
Aim to have a COMPREHENSIVE DEFINITION OF “BUSINESS” to cover all the assets you want
Not unusual to have separate provisions for certain types of assets (e.g. goodwill)
Include a list of assets which are explicitly excluded (if any)
Sometimes a formal transfer of an asset is not possible at completion (e.g. because consent is required by a
3rd party). In these circumstances, the SPA should provide that the SLR will HOLD THE ASSET ON TRUST for the
benefit of the BYR and that the BYR has the right to use the asset pending the formal transfer, so effectively
enabling the entire operation of the target business to transfer.
The assets that are generally considered necessary to continue the running of a target business are:
Customer contracts
Supplier contracts
Hire purchase and leasing agreements
Debts (money owed to the business by customers)
Employees
IP rights
Premises
Motor vehicles
Plant and machinery
Fixtures and fittings
Office furniture and equipment
Stock of raw materials
WIP and finished goods
Investments
Method of transferring individual assets
General considerations
Land and premises Any freehold and leasehold premises which are to be transferred will normally be listed
in a schedule to the sale and purchase agreement
The buyer will assume risk on the premises as from exchange of the agreement and
should take out insurance from this date, or, in the case of leasehold property where the
lease obliges the landlord to insure, have its interest noted on the landlord’s policy
On completion of the acquisition, suitable transfer arrangements will be put in place for
the formal transfer of the premises to the buyer
License to assign
Requesting consent: Leases are assigned using a formal licence to assign
Seller should request consent from landlord to assign as early as possible (as
often considerable delay to obtain)
s.19 LTA 1927 = gives seller redress against a landlord acting unreasonably (where
lease contains covenant not to assign without landlord’s consent, s.19 states that
landlord cannot unreasonably withhold consent)
Guarantees: Landlord will usually want equivalent guarantees from buyer as he had from
the seller
Conditional contract: Acquisition agreement may be conditional on obtaining landlord's
consent if not given by signing
Rare for seller to pass on landlord's cost of license to buyer
1
