There are various ways to acquire a business. One option is to purchase not the company itself, but its assets. This allows you to acquire the necessary property, equipment, real estate or rights, without assuming all the legal entity’s liabilities.
However, every asset has its own legal history. This is precisely why the purchase of a company’s assets requires prior due diligence and the proper preparation of documentation.
Purchasing a company’s assets: what is included in the agreement
Assets are tangible and intangible items belonging to the business. The subject of the purchase may include:
- commercial property;
- production equipment;
- vehicles;
- inventory;
- trademarks;
- property rights;
- accounts receivable;
- specific business lines.
The procedure for registration and the list of documents depend on the type of asset.
When is it advisable to purchase assets specifically?
In many cases, an investor is interested in specific property, rather than the entire company. This approach is chosen when it is necessary to:
- expand production;
- to acquire ready-made infrastructure;
- to acquire a separate business line;
- avoid the seller’s corporate disputes;
- not assume part of the old liabilities.
However, this does not mean there are no risks. Before the transaction, it is important to check the legal status of each asset.
Legal review of contracts prior to asset acquisition
A transaction begins with the documents. Vague terms lead to disputes, often after the transfer of assets has taken place. A legal review of contracts allows you to verify:
- the seller’s title to the property;
- the existence of encumbrances;
- the procedure for transferring the property;
- the parties’ warranties;
- liability for breach of terms.
Particular attention is paid to the wording regarding hidden defects and third-party claims.
What risks arise?
In practice, the biggest problems arise not from the agreement itself, but from circumstances that were not verified in advance. Common risks include:
- seizure of property;
- tax lien;
- legal disputes regarding the asset;
- lack of necessary permits;
- errors in registration documents;
- restrictions on disposal.
This is precisely why due diligence must be carried out before the contract is signed, rather than after the transfer of funds.
A financial lawyer to review the structure of the transaction
Not every risk can be identified in the register or the contract. Some issues relate to the financial implications of the transaction. A financial lawyer analyses:
- tax risks;
- the settlement procedure;
- sources of the assets;
- potential claims from creditors;
- consequences for the buyer following the acquisition.
This helps to assess the true value of the asset, as well as future costs.
Financial services lawyer during negotiations
Negotiations influence the outcome no less than the documents. A financial services lawyer participates in agreeing:
- the structure of the transaction;
- the mechanism for transferring the property;
- the deadlines for fulfilling obligations;
- the seller’s warranties;
- the dispute resolution procedure.
The more conditions are set out at the outset, the fewer grounds there are for conflict in the future.
Support for financial transactions following the signing of the contract
Once the agreement has been concluded, the transfer of assets must be completed and the changes duly formalised. Support includes:
- registration procedures;
- monitoring of contract performance;
- transfer of documents;
- drafting of acceptance and transfer deeds;
- verification of performance.
At this stage, technical or legal shortcomings often come to light, requiring prompt resolution.
Legal assistance from Svarog
Our lawyers support asset acquisition transactions at every stage. We assist with:
- conducting due diligence on assets;
- assessing risks;
- draft the contract;
- structure the transaction;
- oversee the transfer of assets.
This approach allows decisions to be made based on verified data.
Questions and Answers
How do I formalise the purchase of a company’s assets?
Identify the composition of the assets, verify the documents, agree the terms and conclude the relevant contract.
What are the risks involved in purchasing business assets?
Risks relate to encumbrances, legal disputes, tax issues or deficiencies in documentation.
How does the purchase of assets differ from the purchase of corporate rights?
When purchasing assets, specific property is acquired. When purchasing corporate rights, the buyer obtains a share or full control of the company.
What documents are required for a transaction involving company assets?
Depending on the type of assets, title documents, contracts, registration details and financial documentation may be required.
Why carry out due diligence before purchasing assets?
Due diligence helps to identify risks, assess the legal status of the property and make an informed decision regarding the transaction.
How much does legal support for the purchase of assets cost?
The cost depends on the number of assets, the complexity of the due diligence and the structure of the transaction.