How to Review an Asset Purchase Agreement: a Clause-by-Clause Checklist

What an asset purchase agreement does, and how to read it An asset purchase agreement (APA) is the contract under which a buyer acquires specific assets and, usually, only specified liabilities of a business, rather than the company that owns them. That is the whole point of the structure: the buyer cherry-picks what it wants and leaves unwanted liabilities behind with the seller. So the first job when reviewing an APA is to read exactly what transfers and what does not, because a gap in either list is where money is lost. Everything else, the warranties, the consents, the apportionments, supports that core carve-out. This article is general guidance, not legal advice. The law here varies by jurisdiction, so have a qualified professional review your specific deal before you rely on it. ## The clause-by-clause checklist ### 1. The assets being sold

Read the schedule of assets line by line: tangible assets, stock, goodwill, intellectual property, domain names, customer and supplier contracts, receivables, licences and permits. Anything not clearly listed as a Transferred Asset usually stays with the seller. Confirm there is a catch-all for assets "used exclusively in the business" if you expect to run the business whole. ### 2. Excluded assets and the cut-off Check what the seller keeps (cash, certain receivables, tax refunds, personal assets). Make sure the line between transferred and excluded is clean, especially for shared assets used across more than one business the seller runs. ### 3. Assumed liabilities versus retained liabilities This is the clause that makes an APA an APA. The buyer should assume only clearly defined liabilities (for example, obligations under transferred contracts arising after completion). Everything else, especially pre-completion claims, tax and litigation, should be a Retained Liability of the seller, backed by an indemnity. A buyer should resist any broad "and all related liabilities" wording. ### 4. Consideration and apportionment Check the price, how it is paid, and how it is apportioned across the assets, because the split drives tax treatment for both sides (capital versus revenue, depreciation, stamp duty or transfer taxes). A mismatch in the apportionment schedule is a common and expensive oversight. ### 5. Third-party consents and contract transfer Unlike a share sale, contracts do not move automatically in an asset sale. Each material contract that is being transferred usually needs the counterparty's consent (assignment or novation), and some contracts ban assignment outright. Review the list of required consents, who chases them, and what happens if a key consent is refused by completion. ### 6. Employees Employees often transfer by operation of law on a business transfer (for example under TUPE in the UK, or under section 25FF of the Industrial Disputes Act and related rules in India, which varies by jurisdiction). Confirm who bears accrued employee liabilities, how the transfer is communicated, and whether information and consultation obligations apply. ### 7. Warranties and disclosure Warranties in an APA focus on the assets and the business (good title to the assets, condition, the transferred contracts, IP ownership, compliance). As a buyer, check title and encumbrance warranties closely. As a seller, expect to qualify operational warranties by the disclosure letter. ### 8. Indemnities Specific indemnities should cover the retained liabilities and any known risk found in due diligence. Because the buyer is meant to take a clean set of assets, indemnities for pre-completion liabilities are central, not optional. ### 9. Restrictive covenants and transitional help Non-compete and non-solicit covenants stop the seller competing with the business it sold; they must be reasonable to be enforceable. If the buyer needs the seller's systems or people for a while, check for a transitional services arrangement. ### 10. Completion mechanics and boilerplate Confirm the deliverables at completion (bills of sale, assignments, IP transfers, keys and passwords), apportionment of periodic costs, VAT or GST treatment of the sale, governing law and jurisdiction. ## Red flags to stop on - Assumed liabilities drafted broadly, pulling pre-completion risk onto the buyer.

• A key customer or supplier contract whose consent to transfer is unlikely, with no fallback.
• Apportionment of the price left blank or obviously tax-driven in one side's favour only.
• Employee liabilities unallocated, or consultation duties ignored.
• Weak title warranties on the main assets, or no indemnity for retained liabilities. ## Share sale or asset sale, briefly The choice between the two structures changes the whole review. In a share sale the buyer takes the company and all its history; in an asset sale the buyer takes chosen assets and leaves most history behind, but has to transfer each contract and often each consent by hand. Sellers often prefer a share sale for a cleaner exit and better tax; buyers often prefer an asset sale to avoid hidden liabilities. The tax and employment consequences differ by jurisdiction, so confirm the local position before assuming one is better. ## A note on jurisdiction Asset transfers trigger local rules on stamp duty or transfer tax, VAT or GST (and whether the sale qualifies as a transfer of a going concern), employee transfer protections, and the assignability of contracts and licences. In India, stamp duty on asset conveyances varies by state and some licences are not transferable at all. Treat the checklist as the shape of the review and confirm each local point with counsel. ## Where one contract workspace helps An asset purchase agreement carves a business into pieces: assets in, liabilities mostly out, dozens of contracts to assign and consents to chase. The risk sits in the schedules and the lists, and it is easy to lose a line item between the data room, the draft and the completion checklist. Reading an asset purchase agreement against its schedules and lists, marking each position as favourable, neutral or unfavourable, and tracking the contracts to assign and the consents to chase can live in one AI workspace tuned to how your company buys and sells assets, rather than losing a line item between the data room, the draft and the completion checklist. Adira is built along those lines. The checklist above is enough to work through one agreement on your own; a workspace is what keeps the draft, the schedules and the closing items connected.