An asset purchase agreement is a contract under which a seller transfers to a buyer a portion or all of the assets of an entity.
Although the content of an asset purchase agreement may vary in complexity depending on the sophistication of the transaction, it commonly includes the following sections:
- Recitals that describe the relevant background of the transaction.
- A list of definitions of the words that shall rule the interpretation of the asset purchase agreement.
- The terms and conditions for the sale and purchase of the assets, including the purchase price and the terms and conditions for its payment.
- The terms and conditions for the closing of the transaction, if any.
- The representations and warranties of the seller and the buyer regarding, among others, their authority to enter the asset purchase agreement, the legal characteristics of the sold assets, and any other relevant matter related to the transaction and the assets.
- Post-closing obligations of the parties, such as a non-compete clause.
- The indemnification rules, such as the procedure for indemnification, maximum indemnification limitations, prohibition for double compensation, and third-party claims.
- Rules for the termination of the asset purchase agreement.
- Other miscellaneous clauses, such as applicable law and jurisdiction, arbitration clause, and other interpretation rules.
An asset purchase agreement may also be referred to as “APA”.
[Last updated in July of 2021 by the Wex Definitions Team]