Understanding a business asset sale
A business asset sale is the transfer of selected assets and rights of a trading enterprise rather than the sale of its shares. The buyer chooses the items to acquire, such as goodwill, stock, equipment, intellectual property, contracts, leases and domain names, and typically leaves behind unwanted liabilities. This approach can reduce risk for the buyer, deliver cleaner separation for the seller, and allow a more precise allocation of value to the assets that drive revenue and profit.
Asset sale vs share sale
In a share sale the buyer acquires the company with all of its assets, liabilities and historic risks. In an asset sale the buyer acquires only the assets agreed, with liabilities staying with the seller unless expressly assumed.
This difference affects price, tax treatment, employee transfer, consents and transaction timetable. For many owner-managed businesses and carve-outs from larger groups, an asset sale provides greater control over what is transferred and how post-completion responsibilities are managed.
The decision as to whether the transaction is an asset or share sale is usually dictated by the tax advice and planning.
Key stages in an asset sale transaction
The process usually begins with heads of terms that outline the deal structure, price and key conditions. Legal and financial due diligence follows, focusing on title to assets, contracts, property, employment, intellectual property, data, regulatory permissions and litigation.
The parties then negotiate and finalise the asset purchase agreement, disclosures and ancillary documents, manage statutory and third party consents, undertake employee information and consultation, and complete with agreed apportionments, stock valuations and post-completion handover arrangements.
Transferring contracts, property and licences
Most contracts require either assignment or novation to transfer to the buyer. Many commercial agreements, leases and licences include restrictions on assignment or change, so landlord approval, customer consent or regulator clearance may be needed. Real estate is transferred by a deed and may trigger land tax, security release and landlord consent. Intellectual property (including trademarks, software, databases and domain names) must be properly assigned in writing and registered where relevant. If a sector is regulated, continued trading may depend on timely approvals or temporary arrangements.
Employees and tupe in an asset sale
When the sale is of a business as a going concern, employees assigned to that business generally transfer automatically to the buyer under the Transfer of Undertakings (Protection of Employment) Regulations 2006, as amended. The parties must provide employee liability information, inform and, where required, consult with affected staff or their representatives, and agree how employment liabilities and accrued entitlements are allocated. Pensions in relation to old age, invalidity or survivors’ benefits are excluded from automatic transfer, but other pension and auto-enrolment duties may apply and should be addressed in the transaction documents.
Tax in a business asset sale
Tax treatment depends on the assets transferred and how the deal is structured. Where conditions are met, a transfer of a going concern can be outside the scope of VAT, avoiding cash flow and recovery issues. The sale of land or buildings can attract stamp duty land tax based on consideration attributable to the property. Fixtures and plant may require a capital allowances election to preserve value. Goodwill and other intangibles can have different tax consequences for each party, so a carefully drafted price allocation schedule and tax covenants are essential to protect both buyer and seller.
Warranties, indemnities and risk allocation
The asset purchase agreement will include warranties about the target business and title to assets, supported by a disclosure process to clarify known issues. Specific indemnities may address focused risks, such as employment, tax, environmental, product compliance or data protection. Liability caps, time limits, de minimis and basket thresholds, and knowledge qualifiers are negotiated to balance protection with commerciality. Properly prepared disclosure and sensible limitations are key to avoiding disputes.
Transitional services and business continuity
To maintain continuity, parties often agree a transitional services agreement covering IT systems, finance, payroll, customer support, brand use, warehousing or logistics for a fixed period. These arrangements should be clearly priced, time-limited and supported by service levels to reduce operational risk and ensure a smooth handover for staff, customers and suppliers.
Common pitfalls to avoid in an asset sale
Missing or late third party consents can delay completion or cause value leakage if key contracts cannot be transferred. Inadequate tupe planning can lead to employment claims and unexpected costs. Overlooking intellectual property gaps, domain transfers and data protection requirements can disrupt trading. Errors with transfer of a going concern, capital allowances or fixtures elections can create avoidable tax costs. Careful scoping, early stakeholder engagement and clear drafting reduce these risks.
Sectors we advise on asset sales
We advise on business asset sales across a wide range of sectors, including healthcare and social care, retail and e‑commerce, manufacturing and engineering, technology and software, hospitality and leisure, transport and logistics, and professional services. Sector familiarity helps us anticipate regulatory, property and workforce issues that are common in particular industries, and tailor the transaction to preserve value and momentum.
Why choose Stephensons for your asset sale
Stephensons delivers partner-led corporate advice underpinned by the Law Society’s Lexcel quality accreditation and regulation by the Solicitors Regulation Authority. Our corporate solicitors are recognised in leading legal directories and work seamlessly with colleagues in employment, commercial property, intellectual property, data protection and regulatory law to manage every aspect of a business asset sale. Clients value our pragmatic approach, clear timetables and transparent pricing, including fixed or staged fees where appropriate. With national reach and deep experience acting for both buyers and sellers, we focus on protecting your position, completing efficiently and securing the commercial outcome you want.
Frequently asked questions about a business asset sale
What documents are needed for an asset sale
Core documents usually include heads of terms, the asset purchase agreement, disclosure letter, assignments or novations of contracts, intellectual property assignments, property transfer deeds, stock and work in progress schedules, employee transfer documents, board minutes, completion deliverables and, where relevant, transitional services and brand licence agreements.
How long does a business asset sale take
Timelines vary with complexity, third party consents and regulatory approvals. Straightforward transactions can complete in four to eight weeks, while multi-site or regulated deals may require a longer period to accommodate due diligence, consultations and approvals.
Is vat payable on an asset sale
If the transfer qualifies as a transfer of a going concern and the parties meet the relevant conditions, the sale can be outside the scope of VAT. Otherwise, VAT may be chargeable on some assets. Property transfers can also trigger land tax, and careful planning is needed to avoid unintended liabilities. Careful tax planning and advise from a tax advisor is required.
Do employees transfer automatically in an asset sale
Where tupe applies, employees assigned to the transferred business move automatically to the buyer on their existing terms, with continuity of service preserved. There are obligations to inform and, if measures are proposed, consult with affected staff, and there are restrictions on dismissals connected to the transfer unless there is an economic, technical or organisational reason entailing changes in the workforce.
How is the price allocated in an asset sale
Parties agree a detailed allocation across goodwill, stock, work in progress, plant and machinery, intellectual property and property. This supports tax treatment, enables accurate apportionments and helps avoid post-completion disagreements. Independent valuation may be used for certain categories.
What happens to customer and supplier contracts in an asset sale
Contracts typically do not transfer without consent. The parties will identify key agreements early, plan assignments or novations, and agree risk-sharing if consents are delayed. Temporary arrangements or transitional services can protect trading until all approvals are in place.
Our corporate lawyers have a strong track record of successfully assisting both buyers and sellers with all aspects of asset sales transactions. Stephensons will assist you in securing the outcome you desire. If you would like to speak with one of our experienced corporate lawyers please call us on 01616 966 229.
