Asset purchase agreements

An asset purchase agreement (APA), sometimes called a business purchase agreement or business transfer agreement, is the contract used when a buyer takes the business itself (the goodwill, contracts, equipment, stock and staff) rather than the shares in the company that owns it.

I draft and negotiate these for sellers and buyers, on deals ranging from a £30,000 client book up to business sales worth several million pounds.

When a sale is done as an asset sale

If you trade as a sole trader or a partnership there are no shares to sell, so an asset sale is the only option. Where the business is in a limited company there’s a choice, and it’s often the buyer who asks for an asset sale, as it allows them to pick and choose what they take and to leave the company’s history (its debts, disputes and old tax returns) with the seller.

Asset sales are also the usual structure for client banks and books of business, a lot of accountancy practice and financial services deals, many franchise resales, and sales of one division out of a bigger company.

What transfers and what stays behind

The agreement has to set out exactly what’s being sold, because anything which isn’t listed doesn’t transfer. That usually means goodwill and the business name, customer and supplier contracts, equipment, stock and work in progress, intellectual property (trade marks, domain names, software, the website), records and customer data, and the benefit of any licences.

It’s equally important to say what isn’t transferring, which normally means that the seller keeps the cash, the debts owed to the business up to completion and the liabilities incurred before it, although aged debts and work in progress are regularly argued over. Things which straddle completion, such as rent, prepaid subscriptions and deposits taken from customers for work the buyer will be doing, are apportioned between the two of you.

Transferring contracts, leases and licences

On a share sale the contracts stay where they are because the company doesn’t change, but on an asset sale each one has to be moved across. Some can be assigned, some need the other party’s consent and some need a novation, which is a three-way agreement replacing the seller with the buyer. A lease needs the landlord’s consent, which has its own timetable, and regulatory licences often can’t be transferred at all, so the buyer has to apply for its own.

Selling a customer list is also a transfer of personal data, and I’ve written about what that involves in can I transfer my client list when I sell my business? The APA should say who is going to contact the customers and when, and what happens to the price if a key contract doesn’t come across.

Employees and TUPE

TUPE is an area which catches a lot of people out on asset sales. Under the TUPE regulations, when a business or part of one transfers, the people employed in it move to the buyer automatically, on their existing terms and with their length of service intact. That applies whether the buyer wants those employees or not, and a dismissal because of the transfer is likely to be automatically unfair.

As a seller there are two practical things you have to do. The first is to give the buyer written “employee liability information” (who the employees are, their terms, any disciplinary or grievance history and any claims) at least 28 days before the transfer. The second, which applies to both sides, is to inform, and sometimes consult, employee representatives beforehand, although since July 2024 employers with fewer than 50 staff, or where fewer than 10 people are transferring, can deal with employees directly if there are no representatives in place. Getting that wrong can cost up to 13 weeks’ pay per affected employee, and both buyer and seller can be liable for it. I deal with how the APA allocates those risks, and if you need help running the consultation itself, see my page on advice for employers.

VAT and tax on an asset sale

If you sell the assets of a VAT-registered business then VAT is normally due on the price, unless the sale qualifies as a transfer of a going concern, in which case no VAT is charged. The rules are mandatory, so you can’t choose whether to apply them, and they have conditions, including that the buyer carries on the same kind of business and is (or becomes) VAT registered where it needs to be. The APA should say what the parties believe the position to be and who pays if HMRC disagrees. Whether the conditions are met on your deal is a question for your accountant.

The other tax point is where the money ends up, because when a company sells its assets the money is paid to the company, and getting it out to you is a second step with its own tax. On a share sale the price is paid to you directly, and you may qualify for Business Asset Disposal Relief, under which qualifying gains are taxed at 18% for disposals on or after 6 April 2026 (it was 14% in the 2025/26 tax year). This is why sellers often prefer a share sale, and the structure is usually something to be negotiated and settled at heads of terms with your accountant’s input. There’s more in share sale v asset sale, and on the alternative on my share purchase agreements page.

How long it takes and what it costs

A sale usually takes two to three months, although it can take longer. A simple client book transfer can be quicker, but a deal which is waiting on a landlord or a regulator won’t be.

I work on fixed fees, with a written scope of work agreed before I start. The fee depends on the size of the deal and how much work is involved. On a sale or purchase between £500,000 and £5m it’s usually between about 1% and 3% of the price, and the percentage falls as the deal gets bigger. Most full sales and purchases start at around £10,000 plus VAT. Franchise resales, client bank deals and most management buy-outs usually cost less, as there’s less to negotiate. To give an idea of the range, the fee on an asset sale might be £15,000 or it might be £50,000, depending on the value.

Next steps

If you need an asset purchase agreement drafted, reviewed or negotiated, get in touch and let me know what’s being sold and the price, and send me the heads of terms or draft agreement if you have them. I’ll come back to you with a fixed fee.