Asset purchase agreement for buying a business

When do you use an asset purchase agreement?

In an asset deal the buyer purchases the business’s assets rather than the company. That can be fixtures and equipment, stock, goodwill, domains, customer records, trademarks, source code and the contracts that are to transfer. The company or sole proprietorship stays with the seller, together with any liabilities that are not expressly taken over.

An asset deal is the natural route when the seller runs a sole proprietorship or a partnership (I/S), because there is no company to sell. It is also used when the buyer wants only part of the business, such as one shop or one online store out of several, or does not want the risk of the company’s past: old tax, disputes, warranty claims and unknown debt.

If the business is sold as a Danish private limited company (ApS) or public limited company (A/S) with everything in it, it is usually a share deal, and you need the share purchase agreement. The choice affects tax, liability and how much has to be transferred item by item; see the seller’s guide chapter on asset or share sale, and speak to your accountant before you decide.

What the template contains

• Parties, background and definitions: who sells and who buys, and what the key terms mean.
• Assets transferred and excluded assets: what is included (with an asset list as an appendix) and what stays with the seller, such as cash, receivables and debt.
• Price, allocation and payment: the price allocated between goodwill, fixtures, stock and other assets, payment on the transfer date and an optional retention of part of the sum as security for the buyer’s claims.
• Transfer date and stock: when risk passes, and how stock is counted and adjusted.
• Employees, contracts and leases: who transfers, which contracts need the counterparty’s consent, and how the lease is assigned.
• Seller’s warranties, defects and limitation of liability: what the seller warrants, and how liability is limited in time and amount.
• Non-compete and handover assistance: what the seller may not do afterwards, and how much help the buyer gets during the transition.
• VAT, taxes and costs, access and personal data: VAT-free transfer, who pays what, handing over logins and how customer records are handled.
• Conditions, governing law, appendices and signatures.

Points to watch

• Price allocation matters for tax on both sides, because goodwill, fixtures and stock are treated differently. Allocate at market value, use the same allocation on both sides and have your accountants review it. The Danish Tax Agency (Skattestyrelsen) can set aside an allocation that does not reflect real values.
• The asset list is the backbone of the agreement. Anything not on it causes arguments later. Include domains, social media profiles, phone numbers, software licences and leased assets.
• Employees: if the buyer takes over the business as a going concern, the employees generally transfer on their existing terms under the Danish Transfer of Undertakings Act (virksomhedsoverdragelsesloven), whatever the agreement says. The buyer should see every employment contract, holiday entitlement and any pension arrangement before signing.
• VAT: the transfer of a whole business, or an independent part of it, is generally exempt from Danish VAT when the buyer continues the business and is VAT-registered. A sale of individual assets is not. Ask your accountant to confirm this for your deal.
• Third-party consent: leasing, franchise and supplier agreements and the lease usually cannot be assigned without the counterparty’s consent. Make the consent a condition of the deal.
• Warranties and limitation of liability: the seller will want to limit liability (a de minimis threshold, a cap and a time limit for claims); the buyer will want warranties on accounts, assets and contracts. What is reasonable depends on the deal and on what due diligence has shown. Known problems are better handled by a price reduction than by a warranty.
• Non-compete: a clause preventing the seller from running a competing business must be reasonable in time, geography and scope to be enforceable. Ask a lawyer to draft it.
• Security interests: never pay the price straight to the seller if the assets are charged. Usually a lawyer receives the money, redeems the charge and passes on the balance.

Online and physical businesses

For an online shop, SaaS product or content site, the key assets are often intangible: the domain, the source code, the customer database, the newsletter list and accounts with payment providers and ad platforms. State in the asset list how and when each login transfers, and who owns the rights to the code. Customer data containing personal data may only transfer within the GDPR, and customers usually need to be told. Read more in the seller’s guide chapter on the handover and the time after.

For a shop, restaurant or trade business, the premises, fixtures, stock, licences and staff are central. Under the Danish Commercial Leases Act (erhvervslejeloven) a lease can often be assigned on the sale of the business, but the terms and the landlord’s grounds for objection must be checked; see the commercial lease template. Stock is usually counted on the transfer date and settled separately. Licences, such as an alcohol licence, do not normally transfer automatically and must be applied for by the buyer. The chapter on physical businesses covers the rest.

Paying the purchase price

Sitavo does not handle the purchase price. The parties agree how and when to pay, typically by bank transfer on the transfer date, often through a lawyer’s client account, possibly with part held back by a lawyer or bank as security. The template has sections for cash payment, retention and seller financing or an earn-out.

How to use the template on Sitavo

The purchase agreement is available to you if you have an active or pending listing or an ongoing deal on Sitavo. You fill it in with the editor in your account, where parties, business and price can be taken from the listing or deal, edit the wording directly and download it in Word or PDF. The agreement text itself is in Danish, as the deal is governed by Danish law. If you trade through Sitavo, you can instead buy the legal package, where the agreement is filled in with the deal’s details and approved by both parties in the deal process.

The usual order is a letter of intent, then due diligence and then the purchase agreement. If someone signs on a party’s behalf, use the power of attorney. Always have a lawyer review the agreement before signing, and read the seller’s guide chapters on the purchase agreement and the handover.