Share sale or business sale? 5: Getting your ducks in order – How to properly transfer different types of asset in a business sale

August 2025

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This is the fifth Guide in my series about the differences between share sales and business (asset) sales. You should ideally be aware of these if you are a business owner who might ever want to sell (or buy) a business (or a company…).

This fifth Guide explains how you need to draft a business sale agreement carefully to ensure that the various different types of assets which the buyer has agreed to buy from the selling company end up being properly transferred.

You need to be very careful that any business sale agreement spells out clearly all the different assets that are being sold and how they are being transferred. With a share sale you don’t need to bother with any of this as all these assets (and more) are already owned by the target company which the buyer will now own, so nothing more needs to be done.

• Goodwill. This needs to be included in the sale of any business as a going concern. Goodwill is an intangible asset derived from the reputation and connection of the business. It is what the buyer is prepared to pay for over and above what it is paying for everything else in the business. Goodwill needs to be assigned, so the asset purchase agreement either needs to contain appropriate assignment wording or an ancillary goodwill assignment document should be executed on completion. If it doesn’t do this, the buyer might for example find it hard to enforce its rights to stop other people competing with the business by confusing customers into thinking they are dealing with the business. The buyer should also obtain solid restrictive covenants from the selling company (and its owners) to stop them stealing back some of this goodwill later.
• Business information and records. This needs to be included in the sale. Like goodwill, this involves including a general definition of what’s included, such as all information or know-how which in any way relates to the company’s business, customer lists and so on, and then including it in the list of sold assets. It can sometimes be a pain having to work out what records a seller needs to retain and what it can hand over.
• Stock. On an asset sale the buyer will usually agree to take over all stock. But occasionally it may wish to cherrypick the stock it wishes to acquire. If so it may also wish to place restrictions on what the seller can do with any remaining stock, such as damaged stock which it doesn’t want the seller to put on the market.
  Because stock levels can vary so much, which can affect the value of the whole business, in both share sale deals and business sale deals you might want to have detailed provisions addressing how the stock should be valued for the purposes of making a final adjustment to the purchase price based on the stock value.
• Book debts.
• • The seller and buyer will need to agree whether book debts are to be included in the sale. Often the decision is linked to how the parties agree for trade creditors of the company to be dealt with.
  • Occasionally a buyer will agree to buy the book debts (and then often will also agree to be responsible for paying creditors). If it does, this will involve the need for the debts to be properly assigned, which involves proper written notices being served on each debtor so that the buyer can take over any enforcement proceedings. The sale agreement will need to carefully list the debtors and creditors, and the terms will need to be carefully negotiated and agreed.
  • But more usually debtors are not included in the sale. The seller will then need to continue to collect in its debts. Sometimes a buyer will want to put restrictions on how ruthless the seller can be in enforcing these debts against continuing customers of the business.
  • Sometimes the buyer will agree (on terms which need to be negotiated and agreed) to collect in the seller’s debts as agent for the seller (which may no longer have a useful debt-collection capability). The buyer may also agree to use these proceeds to pay creditors of the seller as agent of the seller. This can raise issues such as how hard the buyer has to try to enforce payment, and how it should prioritise debts it recovers from debtors who also become customers and debtors of the buyer.
• Contracts. A company can have all sorts of contracts, with all sorts of different types of suppliers, licensors, customers, joint venture parties and so on. Working out how to deal with contracts can be a particularly complex part of any business sale agreement. Any business sale agreement needs to contain carefully considered and negotiated provisions covering how contracts should be dealt with. It needs to address which contracts the buyer wants to take over, to what extent the buyer might take them over, what obligations or liabilities might the buyer take over, and how do you deal with the logistics of transferring the contract, which is between the company and a third party and which should therefore involve the need to get the other party to agree to some extent or other. This can all be a particularly tricky aspect of any business sale, so the next Guide on this series will deal with just this one key area.
• Intellectual property. Does the business have any IPR which the buyer wants to acquire? Usually an asset sale agreement will have a broad definition of IPR and will then provide that the seller is selling and assigning all its IPR. But where possible, important IPR should also be specifically identified and formally assigned. This is particularly important for IPR which needs registration, such as patents and registered trade marks. Be careful – failure to do this properly can cause problems later if you want to register an assignment but the original seller has since been wound up and so no transfer can be signed.
  Buyers also need to be careful to look into what other IPR is being used by the company which it doesn’t own, and whether any existing licences of IPR used by the company need to be assigned.
• IT and IT systems. These need to be defined and included in the sale. A general catch-all definition usually does the job, to include all IT systems used by the company, plus website, social media accounts and so on. But where the buyer needs to take on some third party licences rather than assets or IPR directly owned by the company, these may need to be identified and included in a bit more detail (often dealt with as a separate category of ‘Contract’).
• Plant and machinery. This could involve a general very broad definition of ‘Plant and Machinery’ to cover all plant and machinery owned and used by the company, and a statement that all ‘Plant and Machinery’ is included in the sale other than any which is specifically stated to be excluded. You might also have a more detailed breakdown confirming that all plant and machinery listed in a schedule to the agreement is included in the sale. This would help to tie in with the warranties given by the seller company to the buyer relating to the ownership and condition of particular assets.
  The ownership of most assets such as these is simply transferred by delivery, so no other paperwork is usually needed to transfer ownership.
• Office equipment. This can be dealt with in similar ways to plant and machinery. But you can’t list everything, so a catch-all is usually included.
• Vehicles: These are another example of assets which can’t simply be transferred by delivery. The buyer needs to ensure that all appropriate vehicle registration paperwork is dealt with.
• Premises.
  If the assets include any freehold or leasehold property, then the business sale agreement will need to include detailed provisions (often contained in extensive schedules) setting out the conditions of sale that will apply. Transfers then need to be registered at the Land Registry.
  For leasehold properties, the parties will need to think about how to deal with requirements in the lease to obtain the landlord’s consent to any transfer of the lease. This can cause problems.
  Buyers acquiring property need to be careful bearing in mind that they can acquire various historic liabilities under various environment statutes, such as relating to contaminated land.
• Shares in subsidiaries.
  Here you have to think about all the issues and documentation appropriate for a share sale.

The next Guide in this series will explain some of the problems that come with trying to transfer your business contracts, and give some guidance on how they can be dealt with in a business sale and a share sale.

What next? Contact me for a complimentary business sale consultation.

If you would like to discuss any of the issues raised in this Guide or any other issues relating to the possible sale of your business (or company!) please feel free to email me at andrew.james@onhandcounsel.co.uk to arrange a complimentary consultation where I can help you to identify what might be involved and how I can help. This will help you to avoid some of the pitfalls to which you might otherwise be exposed, and give you the peace of mind of knowing that you have an approachable competent corporate lawyer ONHAND who can provide you with experienced, effective and cost-effective advice and assistance.

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