Drafting an asset sale agreement
Asset sales are structured differently from share sales. The buyer cherry-picks assets and liabilities rather than acquiring the entire entity. This means more drafting precision is needed to define exactly what transfers and what stays behind.
This is an 8-step workflow for drafting an asset sale agreement under Australian law. It covers the full process from asset identification through to settlement, including employee transfer, warranties, and restraint of trade provisions.
Before you start
- Heads of agreement or term sheet setting out the deal structure
- Schedule of assets to be sold (plant, equipment, IP, goodwill, stock)
- List of employees to be transferred under the Transfer of Business provisions
- Financial statements and details of any encumbrances on assets
The workflow
Define the asset scope and exclusions
Prepare a detailed schedule of assets being sold. Identify tangible assets (plant, equipment, stock), intangible assets (goodwill, IP, licences), and any assets expressly excluded from the sale.
Draft the purchase price and adjustment mechanism
Set out the purchase price, any price adjustment mechanism (e.g. stock-take adjustment, working capital adjustment), and the payment terms including any retention or earn-out.
Address employee transfer obligations
Identify transferring employees and draft provisions consistent with the Transfer of Business rules under Part 2-8 of the Fair Work Act. Address entitlement accruals, redundancy, and notification requirements.
Draft warranties and indemnities
Prepare seller warranties covering title to assets, accuracy of financial information, condition of assets, employee entitlements, and tax compliance. Draft indemnities for any pre-completion liabilities the buyer does not assume.
Include restraint of trade provisions
Draft a restraint of trade clause preventing the seller from competing with the business being sold. Consider cascading restraints and ensure the restraint is reasonable in scope, geography, and duration to be enforceable.
Address third-party consents and assignments
Identify contracts, leases, licences, and permits that require third-party consent to assign. Draft conditions precedent requiring those consents before completion.
Draft GST and stamp duty provisions
Address whether the sale is a supply of a going concern under Division 38 of the GST Act (GST-free if conditions are met). Allocate stamp duty obligations and address any duty implications under state revenue legislation.
Prepare completion mechanics and post-completion obligations
Draft the completion schedule covering delivery of assets, transfer of titles, assignment of contracts, and handover of records. Include post-completion obligations such as assistance with customer transitions and access to records.
What you will have at the end
A complete asset sale agreement with schedules identifying the assets, employee transfer provisions, warranties and indemnities, restraint of trade, and GST/stamp duty treatment. Ready for negotiation and execution.
Common issues
- Incomplete asset schedules that miss key intangible assets like domain names or software licences
- Not addressing Transfer of Business obligations under the Fair Work Act
- Overlooking third-party consent requirements on key contracts or leases
- Incorrectly treating the sale as a going concern for GST purposes
- Drafting unenforceable restraint of trade clauses that are too broad
Run this workflow on a real matter
Quillio helps draft and review asset sale agreements faster — identifying missing schedules, checking warranty coverage, and flagging Transfer of Business issues. See /practice-areas/commercial-lawyers or start a free trial.
This workflow covers standard asset sale transactions. Complex transactions involving regulated assets, cross-border elements, or FIRB approval require additional steps.
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Quillio can run this workflow on a real matter, with citations to current AU authority on every step. The free trial requires no credit card.
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