Instead of acquiring all the shares of a company, and therefore both its assets and liabilities, a buyer very often prefers to take over only certain assets of a company. As a general rule, the company will sell the assets itself in the event of an asset acquisition, while in the case of a share sale, the individual shareholders will be the sellers. The correct identification of the parties to the agreement is essential, especially for companies that may have several independent subdivisions. It is essential to correctly identify the company that is expiring. These items contain insurance and guarantees that the seller makes to the buyer, and vice versa. Representations and guarantees are promises that a party makes on itself, business and assets. It is these promises from the seller that drive the buyer to buy the assets. In large agreements, representatives and guarantees can cover dozens of pages. In small stores, lawyers can often reduce the provisions of this item, but the chances are high that whatever the purchase price, you still have a large number of representations and guarantees that the seller is invited to make. An asset purchase contract is exactly what it sounds: an agreement between a buyer and a seller to transfer ownership of an asset at a price. The difference between this type of contract and a merger acquisition transaction is that the seller can decide which specific assets should be sold and excluded. A merger or acquisition must sell all the assets involved. There are a number of advantages to an asset purhase contract.
One of the main advantages is that the buyer is able to choose the assets and liabilities he wants to acquire. This usually means less risk to the buyer, as there are no hidden liabilities that could have financial consequences on the road. Another important advantage of an APA is that a buyer is able to allocate the purchase price of the assets so that they reflect the market value. This may result in an increase in depreciation, which will result in future tax savings. The oil and gas industry does not distinguish between an asset and the purchase of shares when it designates its corresponding sales contract. In this sector, whether it is the purchase of assets or shares, the final agreement is called the Purchase and Sale Contract (PSA). One of the most important components that must be in an agreement are the things that each party relies on in the transaction. Most of them are involved in the field of representation and guarantees and deal with issues such as guarantees of the adequacy of the product for a particular use, the condition or quality of the items sold and the legal status of the parties entering into the contract.