Asset Deal: What It Means and When It Is the Right Choice

An asset deal moves a business by moving its constituent parts. No single act carries the enterprise across: every machine, every batch of stock, every trade mark and every lease has to be identified, allocated and conveyed in the form that item demands. The purchase agreement is therefore less a narrative document than a working inventory with legal consequences attached to each line.

Naming what is sold: the requirement of specificity

An asset deal only functions if the items being sold are described precisely enough that an outsider could identify them. Loose wording such as "the operating equipment of the plant" invites argument later about whether a given item was covered, and an item nobody can identify is an item that may never have been conveyed at all. Drafting therefore follows the principle of specificity: each item, or at least each class of items with a clean delimiting criterion, must be determined or determinable at the moment of signing.

Much of the drafting effort therefore goes into description rather than bargaining — serial numbers, register entries, licence identifiers, domain names, vehicle registration data. The more granular the wording, the less scope for dispute at completion.

Schedules: where the substance actually sits

The body of the agreement usually stays short. The substance migrates into the schedules, and those schedules are the working documents of the whole exercise. A typical set covers the fixed asset register, a stocktake at a defined cut-off date, the agreements to be taken over, an intellectual property annex, a personnel list, an inventory of permits and — just as important — everything expressly excluded.

Stock and work in progress move constantly, so the schedule needs a counting date, a counting method and a mechanism for adjusting the consideration once the actual figure is known. And the schedule of exclusions carries as much weight as the schedules of inclusions: whatever is not named anywhere simply does not move.

Each category of asset has its own transfer mechanism

Listing an item in a schedule does not convey it. The applicable form has to be observed for each category separately, and the forms differ.

Movable items generally require an agreement plus a handover. Where the item cannot physically move — a press bolted to a floor, goods sitting in a third-party warehouse — the handover is replaced by a substitute arrangement that has to be documented. Land and buildings follow the formalities of the property register and cannot pass by agreement alone. Receivables move by assignment; the debtor's agreement is not needed, but the debtor does need to be told where to pay. Registered rights such as trade marks and patents require recordal with the office that maintains the register; until then, the register still shows the seller. Domains and platform accounts move through each provider's own transfer procedure.

Customer relationships and reputation are the awkward category, because there is nothing to hand over. What can be done is to transfer the underlying data, arrange introductions, secure a restraint on the seller competing, and tie part of the consideration to those relationships surviving.

Taking over agreements: three parties, not two

An agreement with a customer, a supplier or a landlord cannot be moved by the seller and the acquirer alone. Substituting one party for another needs the counterparty to agree, and silence does not amount to agreement. Where a handful of significant agreements is involved, consent letters can be collected before completion and made a condition of it. Where hundreds are involved, the exercise becomes a project of its own, with tracking lists and a fallback for the stragglers.

That fallback usually means the seller stays the formal contracting party while the acquirer bears the economics and performs the work — leaving the acquirer dependent on somebody already paid. Counterparties also notice their leverage: a landlord asked for consent may treat the request as an opening to renegotiate rent or term.

Employment relationships move with the business

Where a transfer of business occurs, the employment relationships pass automatically to the acquirer with all rights and obligations under § 3 AVRAG. There is no selection step: staff cannot be picked out individually the way machines can. For outstanding severance entitlements, transferor and acquirer are jointly liable for a period, which makes the personnel schedule and the review of accrued entitlements substantive preparation.

Liability for what came before

The assumption that everything historic stays behind holds only in part. Under § 38 UGB, whoever acquires a business in principle steps into its business-related legal relationships and answers for existing obligations; an exclusion is available under defined conditions, for instance by entry in the commercial register or by notifying creditors. Under § 1409 ABGB, the acquirer additionally answers for existing debts that were known or recognisable, capped at the value of what was taken over, and that exposure cannot be contracted away as against creditors. This is orientation, not legal advice — the drafting belongs with a lawyer.

What the acquirer has to arrange from scratch

Several things do not travel, and budgeting for them late causes friction. Operating permits and licences frequently attach to a specific person or legal entity and have to be applied for again. Insurance cover, bank facilities, payment terms with suppliers and direct debit mandates are typically concluded anew. Software licences and maintenance agreements often prohibit assignment outright. Certifications and memberships usually require a fresh application in the acquirer's name. Meanwhile the selling entity does not disappear: it continues to hold whatever was excluded and has to be wound down or repurposed deliberately. Where only a defined unit changes hands, that separation exercise is described under carve-out; where there are no shares to sell at all, as with selling a sole proprietorship, this route is the only one available.

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Frequently Asked Questions

How precisely do the assets have to be described?

Precisely enough that an outsider could identify each item from the wording alone. Designation by serial or register number is safest; classes of items work where the delimiting criterion is unambiguous. Anything left undescribed remains with the seller.

Do customers and suppliers have to agree to the change?

Yes, where an existing agreement is to be taken over as a whole. The counterparty's consent is needed and cannot be inferred from silence. Consent for the significant relationships is usually collected before completion and made a condition of it.

Can individual employees be left out?

Generally no. Where a transfer of business occurs, employment relationships pass automatically under § 3 AVRAG with all rights and obligations attached, so selective assumption is heavily restricted.

Is the acquirer liable for the seller's old debts?

Not universally, but not never. Under § 38 UGB and § 1409 ABGB, exposure can arise for business-related obligations that were known or recognisable, in part limited to the value of what was acquired. Certain exclusions are possible. The specific drafting should be reviewed legally — this is not legal advice.

What happens to permits and licences?

They often cannot be sold along, because they attach to the holder rather than to the assets. The acquirer usually has to apply again, and the lead time should be planned before the completion date is fixed.