--- name: prompt-pack-asset-purchase-agreement description: Use when drafting an asset purchase agreement (APA) for a buyer to acquire specific assets or a business unit from a seller, rather than shares. Corporate M&A practice area; covers asset schedules, assumed/excluded liabilities, employee transfer obligations, contract assignment, purchase price allocation, and transition services — with MENA-specific attention to asset transfer mechanics, regulatory consents, and employment law considerations. license: MIT metadata: id: prompt-pack.asset-purchase-agreement category: prompt-pack practice_area: corporate-m-a priority: P2 intent: [drafting, asset-purchase-agreement] related: [prompt-pack-arbitration-agreement-clause, prompt-pack-agreement-legal-draft-review, heuristic-always-state-jurisdiction-first, heuristic-no-us-style-boilerplate-in-civil-law-jx, kb-corporate-mna-mena] source: Louis — HAQQ Legal AI (github.com/sboghossian/mini-claude-for-legal) version: "1.0" --- # Asset Purchase Agreement ## When to use this Use this skill when structuring and drafting an **asset purchase agreement** (APA) — a transaction in which the buyer acquires specific assets (and possibly assumes specific liabilities) rather than the entire legal entity. Asset purchase vs. share purchase: the key distinction is that in an asset purchase, the buyer chooses which assets to take and which liabilities to assume. Unassumed liabilities remain with the seller (subject to successor-liability doctrines in some jurisdictions). This makes asset purchases attractive when the target has unknown or contingent liabilities. Relevant for: - Acquiring a business unit or division without the parent entity - Distressed asset sales (assets only, no legacy liabilities) - Carve-outs from larger group transactions - Acquiring specific IP, real estate, or equipment portfolios --- ## Prompt template > Draft an asset purchase agreement for [Buyer] to acquire [describe assets/business unit] from [Seller]. Include asset schedules, excluded liabilities, employee transfers, contract assignments, purchase price allocation, and transition services. Use [[conversation-clarifying-questions]] to elicit `[bracketed]` inputs before drafting. --- ## Required inputs | Input | Why it matters | |-------|---------------| | Buyer and Seller names and jurisdictions | Determines governing law options; employment transfer obligations | | Description of assets to be acquired | The heart of the APA — must be exhaustively defined | | Description of assumed liabilities (if any) | What the buyer is taking on; critical for deal economics | | Purchase price and payment structure | Fixed; earnout; deferred; escrow | | Employee transfer approach | TUPE/equivalent transfer of undertakings obligations apply in many jurisdictions | | Jurisdictions where assets are located | Multi-country asset transfers require local transfer formalities in each jurisdiction | | Regulatory approvals required | Competition clearance; sector-specific approvals; foreign investment review | --- ## Optional inputs - Transition services agreement requirement (will Seller continue to provide services post-closing?) - IP licensing back to Seller (if Seller retains business that uses the IP being transferred) - Real estate (owned vs. leased; assignment vs. new lease) - Existing contracts to be assigned (consent requirements) - Inventory and tangible assets (physical count at closing) --- ## Document structure ### 1. Parties and recitals - Full legal names and jurisdiction of incorporation - Recital: brief description of the business/assets being sold and the purpose of the transaction ### 2. Defined terms Define with precision: - **Acquired Assets**: the complete list (cross-reference to Schedule 1) - **Excluded Assets**: expressly identify what is not being transferred (critical — ambiguity creates disputes) - **Assumed Liabilities**: the specific liabilities the buyer is assuming (cross-reference to Schedule 2) - **Excluded Liabilities**: everything not in Schedule 2 stays with Seller - **Transferred Employees**: the employees whose employment transfers with the business ### 3. Purchase and sale of assets #### 3.1 Assets schedule (Schedule 1) An exhaustive, itemized schedule is essential. Categories: - Tangible assets (plant, equipment, vehicles, inventory — attach inventory list as sub-schedule) - Real estate (owned property — title deeds; leased property — lease assignments or new leases) - Intellectual property (patents, trademarks, copyrights, trade secrets, domain names — attach IP schedule with registration details) - Contracts (assigned contracts — attach list with counterparty, key terms, assignment consent status) - IT systems and software licenses - Goodwill (if transferring the business as a going concern) - Regulatory licenses and permits (if transferable) - Books and records relating to the acquired business #### 3.2 Excluded assets (Schedule 3) State clearly. Commonly excluded: - Cash and cash equivalents - Accounts receivable arising before the closing date - Tax refunds and credits - Corporate records of Seller relating to excluded operations - Assets used by both the divesting business and Seller's retained business (address through transition services or IP license-back) ### 4. Assumed and excluded liabilities #### 4.1 Assumed liabilities (Schedule 2) Be specific. Commonly assumed: - Obligations under assigned contracts arising after closing - Liabilities to transferred employees arising after closing - Accounts payable arising in the ordinary course of the acquired business before closing (if agreed) #### 4.2 Excluded liabilities All liabilities not expressly in Schedule 2 remain with Seller. Express the exclusion in general terms AND list specifically: - Pre-closing tax liabilities - Product liability claims arising from pre-closing sales - Environmental liabilities (pre-closing contamination — significant in industrial asset sales) - Employment claims arising from pre-closing acts - Any litigation relating to the acquired business pre-closing ### 5. Purchase price - **Amount**: clearly stated in currency; if earnout component, define the metrics, calculation methodology, payment timing, and dispute resolution - **Allocation**: how is the price allocated among asset classes? Critical for tax — buyer and seller often have conflicting interests on allocation; sometimes a price allocation agreement is required - **Escrow**: common for representations and warranties claims; define amount, duration, release conditions, and dispute mechanism - **Adjustments**: net working capital adjustment at closing (target NWC + adjustment mechanism); inventory adjustment; earn-out ### 6. Representations and warranties The seller makes representations about the assets, liabilities, and the acquired business. Key categories: - Title to assets (seller has good title; assets are free of encumbrances) - Condition of tangible assets (sufficient for the purposes for which they are used) - IP (no known infringement; registrations current; no licenses that restrict buyer's use) - Contracts (assigned contracts are valid; no defaults; no consent required [or consents will be obtained]) - Employees (list of employees is accurate; no undisclosed employment claims) - Environmental (no known contamination; no pending environmental proceedings) - Tax (no tax liens on assets; all taxes relating to the assets have been paid) - No undisclosed liabilities assumed Buyer's representations: authority to enter the APA; financing secured (if required). ### 7. Employee transfers This is heavily jurisdiction-dependent: | Jurisdiction | Employee transfer rule | |-------------|----------------------| | UAE (onshore) | No automatic TUPE equivalent; employment contracts must be re-signed with new employer; old employer must pay gratuity accrued to date of transfer; new employer starts gratuity fresh (unless parties agree to transfer gratuity liability) | | DIFC | DIFC Employment Law: no automatic transfer; new contracts required; pay out DEWS/DIFC EWS benefits or agree to transfer | | KSA | No TUPE equivalent; new contracts with new employer required; GOSI (social insurance) transfers manually; accrued employee rights with old employer must be settled | | Lebanon | Labour Code: technically no automatic TUPE; practice varies; consider NSSF (social security) transfer implications | | EU / UK | Transfer of Undertakings (Protection of Employment) Regulations (TUPE) — automatic transfer with existing terms and conditions; information and consultation obligations | | France | Code du travail Art. L1224-1: automatic transfer of employment on transfer of a going concern | In jurisdictions without automatic transfer: the APA must specify that Seller will terminate employees and pay all accrued entitlements, and Buyer will offer new employment to agreed employees. Agreed employees who decline the offer: Seller's responsibility. ### 8. Contract assignment - Contracts that require third-party consent to assign: identify in the schedule; agreement to obtain consents before closing; what happens if consent is not obtained (closing condition? price reduction? carve-out?) - Regulatory licenses: some licenses are personal and cannot be assigned; Buyer must re-apply (regulatory condition precedent) - IP licenses: check the license agreement for assignment restrictions ### 9. Purchase price allocation Different asset classes attract different tax treatment in most jurisdictions. Tax authorities may challenge allocations that are inconsistent with fair market values. Common allocation issues: - Goodwill: tax treatment varies; in UAE (no corporate income tax on most businesses), allocation to goodwill may be neutral; in KSA or Egypt, allocation matters - IP: IP allocated a high value may attract transfer pricing scrutiny if intra-group - Inventory: allocated at cost vs. net realizable value - Regulatory licenses: allocation value drives the stamp duty / registration fee in some jurisdictions (Egypt, Lebanon) Consider attaching a purchase price allocation schedule as part of the APA, with both parties agreeing to use the same allocation for tax reporting. ### 10. Closing conditions and mechanics - **Closing conditions**: regulatory approvals (competition, foreign investment, sector-specific); third-party consents for material contracts; no material adverse change; representations true at closing - **Closing deliverables**: asset transfer instruments (bill of sale; IP assignment deeds; lease assignments; real estate transfer instruments per local law); officer's certificate; good-standing certificate; board resolution - **Simultaneous exchange and completion** vs. **sign-now close-later**: if regulatory approvals are required, there will be a gap between signing and closing; deal protection (interim covenants, MAC definition) becomes critical ### 11. Transition services agreement Where the Seller will continue to provide services to Buyer for a period post-closing (IT, finance, HR, logistics): - Term (typically 6–24 months) - Scope of services (detailed service schedule) - Service levels - Fees (cost-plus or market rates) - Termination on notice This is often a separate agreement but referenced in the APA. ### 12. Indemnification - Seller indemnifies Buyer for: Excluded Liabilities; breaches of Seller representations; pre-closing tax liabilities - Buyer indemnifies Seller for: Assumed Liabilities; Buyer's post-closing conduct - Survival: representations survive closing for a defined period (typically 18–24 months for general reps; longer for title, tax, IP, environmental) - Indemnification cap and basket (deductible): standard in M&A; negotiate based on deal size ### 13. Governing law and dispute resolution Typically: the law of the Seller's or Buyer's jurisdiction or a neutral jurisdiction (DIFC, ADGM, English law). Arbitration clause recommended for cross-border transactions — see [[prompt-pack-arbitration-agreement-clause]]. --- ## Jurisdictional notes ### UAE Asset transfers in the UAE require specific transfer formalities depending on the asset type: - Tangible assets: bill of sale; for registered assets (vehicles, equipment), re-registration at relevant authority - Real estate: transfer through Dubai Land Department / Abu Dhabi DARI (mandatory form + fee + NOC from Seller's bank) - Trademarks and IP: assignment deeds filed with MOCCAE / SAIP / relevant office - Branches and commercial registrations: the business registration is personal to the Seller entity; Buyer must register its own entity ### KSA - Asset transfers require registration with MISA (SAGIA) if foreign investment is involved - Real estate: transfers via Real Estate Registry at Ministry of Justice - Saudization (Nitaqat) obligations: if the business unit employs below the required Saudization percentage, this is an inherited regulatory issue — address in representations and conditions precedent ### Lebanon - Real estate transfers: mandatory registration with the Real Estate Cadastre (Cadastre) - Stamp duty: contracts above a threshold must be stamped (Ministry of Finance fee) - Commercial registration: separate filing required for any assignment of the commercial registration or trade name ### Egypt - Asset transfers: registration requirements vary by asset type - Real Estate Registration Authority for property - Company assets sold as a going concern may require GAFI approval if the acquiring entity is foreign - Stamp duty applies to many commercial contracts --- ## Common mistakes - Excluded liabilities list too vague — "all pre-closing liabilities" without specifics creates disputes; environmental liabilities and employment claims are frequently contested - No consent condition for material contracts — buying a business without the key customer contract because consent was assumed and not obtained - Employee transfer handled informally — no written record of which employees are transferring and on what terms - No earnout dispute mechanism — earnout payments are one of the most litigated APA provisions - Failure to allocate IP rights properly — particularly trade secrets and know-how, which have no formal registration to transfer --- ## Related skills - [[prompt-pack-arbitration-agreement-clause]] — dispute resolution for the APA - [[prompt-pack-agreement-legal-draft-review]] — reviewing an APA presented by the counterparty - [[heuristic-always-state-jurisdiction-first]] — jurisdiction determines transfer formalities - [[heuristic-no-us-style-boilerplate-in-civil-law-jx]] — adapt US-style APA for MENA civil law jurisdictions - [[kb-corporate-mna-mena]] — MENA M&A regulatory and law reference