In my last article, we pursued a section-by-section analysis of an asset purchase contract (APA) with a discussion of the meaning of the Definitions section. Today I go briefly on „buying and selling acquired assets; Taking on the debts assumed“ in the APA. Perhaps the strongest protection for the buyer is to have a viable seller after the transaction, to respond both to the buyer`s post-closing claims and to satisfy the claims of other creditors (including public authorities) who may demand payment from a „successor“. Where possible, buyers should require sellers to remain in place until the current statute of limitations expires and to maintain insurance coverage for current and pre-defined debts. With respect to means of payment, purchasers should need sufficient reserves to cover potential receivables and liabilities in advance, including reserves to cover deductible amounts and self-insured deductions. Unfortunately, sellers who are able to meet these requirements are the least likely to present estate liability issues to their buyers, and the best value for assets are often desperate sellers. A seller`s creditors are not involved in the acquisition agreement and are not related to it. (Sales made by bankruptcy decision pursuant to 11 United States. C 363 and other court sales may be an exception to this rule.) The sales contract alone cannot offer complete protection to the buyer. The asset purchase agreement entrusts responsibility between the parties to the seller`s obligations.
A right of compensation may be of low value if assets are acquired by a seller in difficulty or bankrupt. Creditors will seek reinstatement wherever they can claim a debt, and the courts were open to some very new theories of recovery. If a seller is in distress or is insolvent, this risk must be identified and quantified. The sale price should reflect both the cost of defending these rights and the potential for success. In many cases, insisting on a sale through bankruptcy, bankruptcy or other legal means to obtain court protection may be the only prudent option to acquire assets from certain companies. Given the above list and a large number of other issues, each potential seller/buyer should have all the assets (liabilities) corresponding to the purchase and sale of acquired assets; Taking on the debts incurred by the APA. If this analysis is properly taken into account, it will lead to more effective due diligence and successful integration, while reducing the risk of processes and reaching consensus on what is actually considered part of the proposed transaction.