When buying or selling a business, there are two core methods: Asset Purchase or Share Purchase.
Mandani Law Professional Corporation has the experience and required resources to assist clients throughout the purchase or sale of a business while protecting their interests and mitigating their risk exposure.
Asset vs. Share Purchase:
An asset purchase involves the sale of individual assets.
In an asset purchase, the seller sells some (or all) business assets and liabilities but maintains ownership of the entity’s shares. The agreement between the parties details which assets and liabilities are being exchanged.
A share purchase involves the purchase of 100 percent of the shares of a company.
The seller releases all rights and liabilities associated with the business, and the buyer inherits these rights. Often this is done without interruptions to the company and its operations.
For a sale of a business to be finalized, due diligence is required. The business due diligence involves an understanding of the material contracts and investigation of the current assets of the corporation, the fixed assets of the corporation, the employee relations, the status of all liabilities, the environmental restrictions, the banking relations etc. The legal due diligence involves the corporate structure and organization, financial disclosures, corporate searches, title searches, reviews of materials contracts, etc.
Asset transactions are more favorable to the buyer as they are informed of the exact assets and liabilities they acquire. Less due diligence is required as assets the purchaser does not agree to purchase or liabilities that the purchaser does not agree to assume are not a major concern.
Share transactions are generally viewed as more favourable to the seller as the seller releases all rights and liabilities tied to the business. More due diligence is required as the purchaser will want to conduct a comprehensive and thorough review.