What Is an Asset Transfer Agreement?
Definition and Purpose of an Asset Transfer Agreement
An asset transfer agreement is used when specific property or rights move from one party to another.
Key Elements of an Asset Transfer Agreement
Parties Involved in the Agreement
The seller and buyer shall be named by their legal name, including registered office and registration number. It should also state that the parties are authorized to enter into the transaction.
The operating company may not own every IP right, domain name or contract the business uses.
Asset Transfer Agreement Template
An asset transfer agreement template gives the deal a ready structure. Schedules can then hold lengthy or technical lists.
The fault is in regarding a template as a completed item.
Take a precedent agreement for machinery. It may provide that title passes on "delivery" of the goods. In the case of copyright and a registered mark, this will be an insufficient concept.
Therefore, a template for an asset transfer agreement is most effective as a checklist, customized to the specific transaction.
Business Asset Transfer Agreement or Share Sale?
A business asset transfer agreement enables the buyer to buy the business assets or a portion thereof, rather than the business itself.
In a share sale, the company continues to hold its property, only the ownership of that stock, that share in the company gets transferred.
An asset sale gives the parties more latitude as to what is included in the transaction, but each asset must be inspected individually.
Contracts are the classic example. Schedule a customer contract doesn't necessarily assign it. The contract may be that you cannot assign or that the customer's consent is required to assign. Licenses and regulatory permissions may have analogous problems.
Tax Points That Should Be Checked Early
Depending on the jurisdiction, a sale may be subject to corporate income tax, capital gains, VAT, sales tax, stamp duties or other levies. Price allocation also matters where a number of asset classes are sold together under one price.
There can be bona fide tax advantages for one structure as opposed to another but they must be evaluated in light of the actual facts of the transaction and the applicable rules.
EU-related deals may also involve a separate VAT/VIES review, particularly where parties or operations are located in different Member States.
Asset Transfer Agreement Example
Certain local asset transfer agreements may require notarization, registration, tax filings, notices or approvals. Some rights may also be non-transferable or only transferable with consent.
Cross-border transactions require additional caution, as more than one legal system may apply.
For example, a Cyprus entity may be selling a UK trademark and software produced by contractors in Poland to a buyer in the UAE. The choice of law in the main agreement may be that of one country, but the requirements for the effectiveness of particular assignments fall under the laws of another.
Local Asset Transfer Agreement and Cross-Border Deals
Certain local asset transfer agreements may require notarization, registration, tax filings, notices or approvals. Some rights may also be non-transferable or only transferable with consent.
Cross-border transactions require additional caution, as more than one legal system may apply.
For example, a Cyprus entity may be selling a UK trademark and software produced by contractors in Poland to a buyer in the UAE. The choice of law in the main agreement may be that of one country, but the requirements for the effectiveness of particular assignments fall under the laws of another.
A Practical Drafting Checklist
Before drafting, answer a few practical questions: What does the buyer anticipate to possess the day after closing? Who owns each of those things today? Which documents evidence such ownership? Are there any mortgages, pledges, licenses or other restrictions? Does anybody else have to agree?
Then, check the commercial part: the price, the payment date, the conditions of closing and the precise moment at which title is transferred.
Common drafting errors are missed consent requirements, incomplete completion mechanics and an unchecked assumption that the seller owns all rights in the work.
The team at Icon.Partners are also experienced in the negotiation and documentation of acquisitions and other transactions (including those with a cross-border dimension) involving IP, digital projects and other assets.