Asset Purchase Agreement Considerations

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This provides a brief overview of some of the problems faced by companies involved in an asset purchase transaction. Depending on the specific actual situation of each company, there may be many other considerations, so it is important to consult a legal expert to ensure that the transaction is executed correctly and in the most advantageous manner. For assistance related to a matter similar to the one discussed above or other legal matters, please contact General Counsel, P.C. at (707) 556-0411 or by email at info@gcpc.com. 2016 was a year in which many buy-and-sell transactions took place. There seem to be some reasons for this. Overall, business has improved markedly since the end of the Great Recession. The result is an increase in corporate values of all kinds. Those who wanted to sell their businesses during the recession were waiting for values to return to their pre-recession level or surpass it. And there is considerable financing in the market.

Local and country-friendly financial institutions are trying to borrow money for transactions that make financial sense. Finally, with respect to the purchaser`s base in the assets acquired from the date of the transaction, No. 1012 specifies that the purchaser`s base in the acquired assets is identical to the consideration paid for that property. Therefore, the basis of each asset for the buyer at the time of the transaction should correspond to its fair market values. Is there a letter of acceptance or a form reflecting the commercial intentions of the parties? If so, legal advisors should be informed (if these advisors were not involved in the initial phase). However, there are two critical constraints on the buyer`s ability to assign the purchase price; Both are in No. 1060. First, the buyer and seller must accept the structure of the purchase price allocation or the fair value of the transferred assets. The second limitation of the buyer`s allocation is also found in No.

1060 and the corresponding provisions of the treasury, which provide for a residual allocation method. According to this method, there is a 7-class hierarchy to which the assets are allocated, which prevents the possibility of a free allocation of the entire price to an asset or any other flagrant misappropriation exclusively for a tax benefit.

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