Why do I need an Agreement for Sale and Purchase of Business and Assets?
Selling or buying a business can be an exciting yet complicated process. It’s essential that the seller and buyer record the key terms of their deal and have a roadmap for how the business is to be transferred. An agreement for sale and purchase is a legal document used to transfer business assets from the seller to a buyer (the new owner). If the seller’s shareholders are instead selling all their shares in the business, you need our Agreement for Sale and Purchase of All Shares.
Using our Agreement for Sale and Purchase of Business ensures both parties clearly understand what assets are included (and what aren’t) in the deal, how much the buyer is paying and when payment is due (and whether there will be any adjustments to that), what will happen with employees, what consents, approvals or conditions need to be obtained or satisfied, and the requirements and process on completion. The agreement also includes statements made by the seller (known as warranties) regarding the business and assets to provide assurance to the buyer regarding the condition and ownership of the assets. If these warranties are found to be inaccurate, the buyer may have a legal claim against the seller. A seller will want to limit its potential liability for these claims.
A simple, clear and well-drafted agreement for sale and purchase reduces misunderstandings and the potential for disputes and facilitates a smooth transition of the business to the new owner.
What’s in an Agreement for Sale and Purchase of Business and Assets?
NZ lawyers have created this agreement for use by NZ businesses. It is simple, easy to understand, without unnecessary legalese, and fair to both sides, reducing negotiation time and keeping the relationship positive. It is also flexible so that you can customise it to your particular deal.
The agreement sets out all the essential terms of a typical business sale and purchase transaction, such as purchase price, timing of payment, included and excluded assets (eg. debtors, or specific fixed assets or intellectual property), optional price adjustment for changes in the level of stock, conditions, employee offer terms, optional handover assistance terms and optional non-competition and non-solicitation restraints.
This agreement is designed for common asset sale scenarios. It is not intended to include the sale and purchase of land and/or buildings. If your business sale and purchase includes the sale of land and/or buildings, your agreement will need further customisation and advice from a lawyer.
The agreement provides for the seller and buyer to agree to allocate the total purchase price to each class of assets sold (such as fixed assets, stock, intellectual property, debtors and goodwill) to meet the requirements of section GC21 of the Income Tax Act 2007. It is not designed to include 'the sale of timber or the right to take timber', 'depreciable property that is buildings' or 'financial arrangements' other than debtors. If your business sale and purchase includes the sale of these tax asset classes, this agreement will need further customisation and advice from your accountant or tax advisor.
How long will it take to create my document?
15-25 minutes – anywhere, anytime! During the Q&A you can save your progress to come back later, or repeat the Q&A to change an answer or produce a new version of a document.
What information do I need to complete the Q&A?
- The name, contact details and GST number of the seller and buyer
- What assets are included and what assets are excluded (such as debtors)
- Purchase price, whether an adjustment will be made for changes in stock, and payment terms (will a deposit be paid?)
- Allocation of the purchase price to each tax asset class
- Conditions, such as due diligence, buyer finance, consent to the transaction from key customers/suppliers or the seller’s landlord, and the date these conditions need to be met
- Completion date (also known as settlement date)
- Handover assistance terms (eg. whether (and for how long) the seller will provide help after the sale)
- Non-competition and non-solicitation terms – will the seller be prevented from competing with the business or encouraging clients or staff to terminate or reduce their dealings with the business for a fixed time (and in a certain area) after completion?
- If non-competition and non-solicitation terms are included, and the seller is a company, will the seller’s key shareholder (or director) be required to personally agree to these restraints by being a party to the agreement?
What if I need help?
On Your Terms has teamed up with Luminate Legal to offer its customers the option of obtaining legal advice from a lawyer to provide extra assurance and peace of mind. If you would like to ask a lawyer some quick questions about your document (or your responses to the Q&A), or have your document reviewed/edited by a lawyer, click here to view and select Luminate Legal's packages and fixed-fee pricing exclusively for On Your Terms customers.
What do I do once my Agreement for Sale and Purchase of Business and Assets is created?
As soon as you download the agreement, it is ready to be signed (or negotiated and then signed). Your document will be in Word, so you can amend it if necessary.
Other helpful information:
- Read our blog: Selling up Shop: What happens to employees when a business is sold?
- If the seller is a company and its shareholders are selling their shares (rather than the seller selling its business), you instead need our Agreement for Sale and Purchase of All Shares
- You may also find these bundles or documents useful for your business: Mutual Confidentiality Agreement, Term Sheet for Sale and Purchase of Business, Deed of Assignment of Intellectual Property, Deed of Assignment of Lease
- Check out our FAQs here
If you’re unsure whether this agreement is what you need, reach out to us at hello@onyourterms.co.nz – we’re happy to help!
If you’re not satisfied with your purchase of this product for any reason, let us know why within 10 days of your purchase and we’ll work with you to make sure you’re happy, including giving you a full refund if necessary.
Disclaimer: On Your Terms was created to provide fast, easy and affordable access to legal information and documentation. We are not a law firm and do not provide legal advice. The information and documents we provide are of a general nature, designed for common situations, and may not be suitable for your needs or circumstances. If you need legal advice, we have a network of specialist law firm partners able to help you here.