The IFSC (International Financial Services Centre) code, in India, was introduced by the government in April 2015, in Gujarat at the GIFT Multi Services Special Economic Zone (SEZ), its main purpose is to make India a hub for international financial services.Continue reading
Mergers and Acquisition deals have recovered pretty well even when the pandemic disrupted all the sectors in 2020. In the aftermath of COVID-19, the cornerstone of deal-making in 2022 continues to focus on recalibrating strategy and driving technology adoption. The global markets have shown new trends and it seems they will persist for the time being.Continue reading
Business law can also be termed mercantile or commercial law. It forms a part of both public and private law. In India, statutes that regulate business include the Indian Contract Act 1872, Sale of Goods Act 1930, Competition Act 2002, Companies Act 1955, et cetera.Continue reading
The National Company Law Tribunal is the result of the Eradi Committee, and it is intended to be implemented in the Indian legal system under the Companies Act, 1956. However, due to a ten-year legal battle over the constitutional validity of NCLT’s foundation, it was announced under the Companies Act of 2013.Continue reading
Modern times have forced more & more businesses to go online & with the rise of COVID-19, there hasn’t been a better time to switch. Many businesses are switching to the online medium, which is giving rise to many new challenges. One of them is writing the Terms & Conditions of your website. The lack of information in the mainstream media can create many problems in starting a business with long-term well defined policies. Therefore, catering to the business this article aims to clarify all the ins-and-outs of Terms & Conditions for your website, allowing you to understand & write your own.Continue reading
In the 21st Century, the business developed quite well. With the advanced technology and the internet era, businesses boomed and the functions and operations of business changed drastically. But, as we move forward with technology and business, one thing which lies between them is the trade secrets. Trade Secrets is basically the secret information about the business like for example new business model strategies, new product designs, methods etc.Continue reading
As we all know that for any kind of business we necessarily need four things, i.e, land, labour, capital and entrepreneurship. Land comes as the first and foremost important factor of production. Place at times becomes an identity of any kind of entity. It becomes a starting point, where the production process starts or becomes a landmark where people come to seek services.Continue reading
Private equity (PE) is a form of financing in which money, or capital, is invested in a business. Typically, PE investments are made in mature companies in traditional industries in exchange for shares or equity. The PE is an important subset of a larger and more complex part of the financial landscape known as private markets.Continue reading
By Nevin Clinton
Purchase or sale of assets is a vital part of a plethora of businesses and it is of paramount importance that both parties to such a transaction get fair terms and treatment. Therefore, it is essential that such terms are written down and agreed upon. This is where an asset purchase agreement comes into the picture.
What is an Asset Purchase Agreement?
An asset purchase agreement (hereinafter referred to also as APA) is nothing but an agreement made between a buyer and seller in order to transact on an asset for a fixed price. It must be noted here that an asset purchase agreement is completely different (albeit confused with) from a merger and acquisition transaction. In the latter, there is transfer of all assets concerned whereas in the former it is just a few specified assets that are sold and bought.
Why is an Asset Purchase Agreement necessary?
An APA is important because it comes with a plethora of advantages that help make the process of transfer of an asset simpler. Clear laying down of the structure and mode of transaction can be laid down and the terms can be made clearer than they would have been in an oral agreement. Problems with the law or with minority shareholders can be avoided as well. Apart from all these, the important fact of the matter is that they help both parties in understanding their roles and in protecting their rights.
Are there any downsides to an Asset Purchase Agreement?
There are a few disadvantages that are associated with an APA despite its aforementioned positive points. For example, there can be higher costs involved especially when a process of retitling of the asset is done. The agreement would need to be reviewed and approved by the concerned authorities and that could be time-consuming. Also, there can be times when an APA is not needed at all and some other legal instrument is required. In such cases, it is necessary to choose the right kind of agreement, failing which, complications could arise. Therefore, it will also be advisable and essential to hire legal personnel to help with drafting and coming up with terms in the agreement.
What are the essentials of an Asset Purchase Agreement?
- Details on Assets Transferred: An APA must contain the terms concerning the transfer of the asset and how the same must be effected. Royalty fees involved, if any, and other such details must also be mentioned in the agreement.
- Price: The price of the asset and the mode of payment that would be used must also be stated.
- Indemnification Clause: It is advisable that an indemnification clause be given in an APA in order to indemnify the buyer in instances like any legal suit, unforeseen losses, fines etc.
- Termination: Details on how and when the APA can be terminated and cease to exist can also be stated. This can be when there is mutual consent or when terms are breached by either party etc.
- Obligations post transfer of asset: The relationship between the buyer and seller does not stop with the transfer of the asset. There are bound to be certain obligations post sale on the part of both parties. This can be elucidated upon in the APA.
- Other such details that might be necessary to include in the relevant case.
An APA, according to Blount Law, must have an answer to four of the following: Who? (parties involved), what? (the asset), how? (mode of transfer, payment etc.), what happens after? (post-sale obligations).
An Asset Purchase Agreement is an efficient way to make the rights and obligations of a buyer and seller clear when an asset is transferred. Notwithstanding the few mentioned disadvantages concerning it, its advantages easily outweigh the same and hence, it is absolutely necessary that in most cases, an APA must be drafted.
Vendors are an essential part of any company and it’s critical to have a strong vendor agreement in place when one buys goods or services from vendors. This is because a sound vendor agreement clarifies the specifics of a business transaction and can help avoid a plethora of problems.Continue reading