1. Asset Purchase Vs Stock Purchase Agreement
A transactional agreement governs an exchange of business value. For acquisitions, choosing assets or shares changes what transfers, which obligations remain, and whose consent the buyer needs.
Purchased Assets and Assumed Liabilities
An asset purchase agreement identifies included assets, excluded property, and assumed obligations. Schedules should name the equipment, intellectual property, and contracts the buyer expects to receive.
Excluding the seller’s debts does not necessarily defeat third-party claims. Successor-liability exceptions and statutory obligations may apply despite the parties’ allocation.
For a qualifying bulk sale, the purchaser must file Form AU-196.10 at least ten days before paying for or taking possession of the assets, whichever happens first. Failure to satisfy notification and withholding requirements can expose the purchaser to unpaid sales tax liability.
Shares and Existing Company Obligations
A stock buyer acquires shares. The company generally retains its assets, debts, and contractual obligations. These liabilities affect its value without automatically becoming the buyer’s personal debts.
Review pending claims, taxes, financing, and outstanding equity rights. An LLC membership-interest purchase also requires examination of operating-agreement restrictions.
Assignment and Change-of-Control Consent
An asset sale may require consent to assign leases or customer contracts. A stock sale may trigger a change-of-control clause even though the contracting company remains unchanged.
Read the actual restriction. Assignment and ownership changes are not interchangeable, and permits may have separate transfer requirements.
2. Binding Provisions in a Letter of Intent
An LOI can contain both preliminary deal terms and immediately binding provisions. The document’s title alone does not determine whether a party can enforce an obligation.
Confidentiality, Exclusivity, and Expenses
The LOI should identify binding sections and their duration. An exclusivity clause may restrict solicitation, negotiations, or signing another agreement. Its scope and expiration determine what the buyer and seller can do during diligence.
Expense provisions should state who pays and when reimbursement applies. Ending negotiations does not automatically require payment of the other party’s costs.
Negotiation Duties and Closing Obligations
A duty to negotiate differs from a duty to close. In IDT Corp. V. Tyco Group, S.A.R.L., the Court of Appeals distinguished an enforceable agreement from performance conditioned on additional negotiated agreements.
Check whether the LOI permits withdrawal, requires negotiations, or reserves commitment until definitive documents are signed. Failed negotiations alone do not establish breach. Drafts and correspondence may help clarify the parties’ intent.
3. Governing Law and Dispute Resolution Clauses
Governing law, court selection, and arbitration serve different purposes. Consistent dispute resolution clauses reduce uncertainty when the acquisition includes several related agreements.
Applicable Law and Selected Courts
A governing-law clause selects law for interpretation and enforcement. A forum-selection clause identifies where litigation may proceed. Check whether the selected forum is exclusive and which disputes it covers.
Naming federal court does not create federal subject-matter jurisdiction. The selected contract law may also differ from the law governing the company’s internal affairs.
Arbitration Across Related Agreements
An arbitration clause should identify covered disputes, rules, hearing location, and any court-relief exceptions. Compare it with the LOI, guarantees, and other transaction documents.
Conflicting provisions may send related claims into different proceedings. Participation in the acquisition alone does not establish an obligation to arbitrate.
4. Frequently Asked Questions
Partial acquisitions and personal guarantees require attention beyond the assets-versus-shares decision. Their treatment depends on the transaction documents and third-party rights.
Yes. An asset purchase can cover a division or specified assets. Shared software, facilities, and records may require separate arrangements. Transition services may be necessary until the acquired operation functions independently.
Generally, the acquisition alone does not release a guarantor. A buyer’s debt-assumption promise may leave the creditor’s rights unchanged. Any necessary release or substitution requires the creditor’s agreement.
5. Reviewing the Agreement before Signing
When an LOI or purchase draft arrives, transactional review can address what transfers, which duties begin immediately, and which approvals remain outstanding. An attorney can compare the proposed terms with the intended acquisition before signature.
Records Needed for Review
Provide the draft, schedules, NDA, material contracts, debt documents, permits, and relevant correspondence. Identify shared resources and outstanding guarantees. These records help reveal gaps between the agreed price and the business the buyer will actually receive.
02 Jun, 2026
