What is an Asset Purchase Agreement?
An Asset Purchase Agreement (APA) is a legally binding contract under which a buyer acquires specific assets of a business, rather than the business entity itself. The seller’s company continues to exist after closing; only the assets named in the agreement change hands. This is the key structural difference from a share purchase, where the buyer acquires the company as a whole, every asset and every liability, by buying its shares instead. In an asset purchase, the buyer and seller negotiate exactly which assets transfer, equipment, inventory, contracts, intellectual property, goodwill, and which liabilities the buyer agrees to assume, leaving everything else with the seller.
This structure is used across a wide range of transactions: a buyer acquiring a specific product line or division rather than an entire company, a buyer who wants to avoid inheriting a seller’s undisclosed liabilities, an acquisition where only part of a business is genuinely wanted, or a distressed sale where the buyer specifically wants to leave certain debts behind with the seller. What all of these situations share is the need for a single document that defines exactly what is being bought, what liabilities come with it, and what protections the buyer has if something about the business turns out to be different from what was represented.
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(Seller and Buyer are each referred to individually as a "Party" and collectively as the "Parties.") WHEREAS, Seller owns and operates [ BUSINESS DESCRIPTION ] (describe the business or undertaking to which the purchased assets relate); WHEREAS, Seller wishes to sell, and Buyer wishes to purchase, the assets described in this Agreement, on the terms set out below; NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the Parties agree as follows: "Purchased Assets" means the assets described in Schedule A. "Excluded Assets" means the assets described in Schedule B, which are expressly not included in this sale. "Assumed Liabilities" means the liabilities described in Schedule C, which Buyer expressly agrees to assume. "Excluded Liabilities" means all liabilities of Seller other than the Assumed Liabilities, which shall remain the sole responsibility of Seller. "Closing" means the completion of the transaction contemplated by this Agreement, as described in Clause 5. [ ADDITIONAL DEFINED TERMS ] Subject to the terms and conditions of this Agreement, at Closing, Seller shall sell, transfer, assign, and deliver to Buyer, and Buyer shall purchase and accept from Seller, all of Seller's right, title, and interest in and to the Purchased Assets, free and clear of all liens, encumbrances, and third-party claims except as specifically disclosed in Schedule D. For the avoidance of doubt, the Excluded Assets are not included in this sale and shall remain the property of Seller. The total purchase price for the Purchased Assets shall be [ TOTAL PURCHASE PRICE ] ("Purchase Price"), payable as follows: [ PAYMENT TERMS ] (e.g., lump sum at Closing / instalments / escrow arrangement, specify schedule). The Purchase Price shall be allocated among the categories of Purchased Assets as set out in Schedule E. The Parties agree to file all tax returns and reports consistently with this allocation. Buyer agrees to assume and discharge only the Assumed Liabilities described in Schedule C. Buyer expressly does not assume, and shall have no responsibility for, any Excluded Liabilities, whether known, unknown, disclosed, undisclosed, contingent, or otherwise, including without limitation [ SPECIFIC EXCLUDED LIABILITY EXAMPLES ] (e.g., pending litigation, undisclosed tax liabilities, employee claims arising prior to Closing). Closing shall take place on [ CLOSING DATE ], or such other date as the Parties may agree in writing ("Closing Date"), at [ CLOSING LOCATION ] or remotely by exchange of documents. Closing shall be subject to satisfaction of the following conditions: [ CLOSING CONDITIONS ] (e.g., receipt of required third-party consents, regulatory approvals, accuracy of representations and warranties as of Closing). Seller represents and warrants to Buyer that, as of the Effective Date and as of Closing: (a) Seller has good and marketable title to the Purchased Assets, free of all liens and encumbrances except as disclosed in Schedule D; (b) Seller has full power and authority to enter into and perform this Agreement; (c) entering into this Agreement does not conflict with or breach any other agreement, licence, or legal obligation to which Seller is subject; (d) the financial and operational information provided to Buyer in connection with this transaction is accurate and not misleading in any material respect; (e) there is no pending or threatened litigation, investigation, or claim against Seller relating to the Purchased Assets, except as disclosed in Schedule D; (f) Seller is in compliance with all applicable laws relating to the Purchased Assets and the business; and (g) [ ADDITIONAL SELLER REPRESENTATIONS ]. Buyer represents and warrants to Seller that: (a) Buyer has full power and authority to enter into and perform this Agreement; (b) this Agreement constitutes a valid and binding obligation of Buyer, enforceable in accordance with its terms; and (c) [ ADDITIONAL BUYER REPRESENTATIONS ]. Seller shall indemnify, defend, and hold harmless Buyer against any losses, damages, liabilities, and reasonable costs, including legal fees, arising out of: (a) any breach of Seller's representations, warranties, or covenants under this Agreement; (b) any Excluded Liability; or (c) [ ADDITIONAL SELLER INDEMNITY SCOPE ]. Buyer shall indemnify, defend, and hold harmless Seller against any losses, damages, liabilities, and reasonable costs, including legal fees, arising out of: (a) any breach of Buyer's representations, warranties, or covenants under this Agreement; (b) any Assumed Liability; or (c) Buyer's operation of the Purchased Assets after Closing. The maximum aggregate liability of either Party for indemnification under this Clause shall not exceed [ LIABILITY CAP ], except in cases of [ LIABILITY CAP EXCLUSIONS ] (e.g., fraud, wilful misconduct, or breach of the title warranty in Clause 6(a)). Indemnification claims must be brought within [ INDEMNIFICATION SURVIVAL PERIOD ] of Closing. [ EMPLOYEE TRANSFER TERMS ] (specify whether Buyer will offer employment to any of Seller's employees, on what terms, and how accrued entitlements such as leave, severance, or statutory dues are handled. Note: in the UK and EU, applicable transfer-of-undertakings regulations may apply automatically regardless of what this clause states; confirm local requirements before finalising this section.) For a period of [ NON COMPETE DURATION ] following Closing, Seller shall not, directly or indirectly, engage in [ NON COMPETE RESTRICTED ACTIVITY ] within [ NON COMPETE GEOGRAPHIC SCOPE ]. For the same period, Seller shall not solicit for employment any employee who transferred to Buyer, nor solicit any customer or supplier of the Purchased Assets to cease or reduce its business relationship with Buyer. Each Party shall keep confidential all non-public information disclosed by the other Party in connection with this transaction, both before and after Closing, for a period of [ CONFIDENTIALITY PERIOD ], except where disclosure is required by law or regulatory authority. Each Party shall be responsible for its own tax obligations arising from this transaction. [ TAX ALLOCATION TERMS ] (specify any agreed tax treatment, cooperation on filings, or allocation of transaction-related tax costs between the Parties, including, where applicable, compliance with slump sale, GST, or other jurisdiction-specific requirements). The Parties acknowledge that this transaction may be subject to notification or approval requirements under applicable competition, antitrust, or sector-specific laws in the jurisdictions where the Purchased Assets are located or the business operates. Each Party shall cooperate in good faith to complete any required filings or approvals prior to Closing. Following Closing, each Party shall execute and deliver such further documents and take such further actions as may be reasonably necessary to give full effect to the transfer of the Purchased Assets and the intent of this Agreement. Neither Party may assign or transfer its rights or obligations under this Agreement without the prior written consent of the other Party, except [ ASSIGNMENT EXCEPTIONS ] (e.g., to an affiliate, or in connection with a subsequent sale of substantially all of the acquiring Party's assets). Any dispute arising out of or relating to this Agreement shall be resolved by [ DISPUTE RESOLUTION MECHANISM ] (e.g., arbitration under [institution] rules, seated in [city], or litigation in the courts of [ JURISDICTION FOR DISPUTES ]). This Agreement shall be governed by and construed in accordance with the laws of [ GOVERNING LAW ]. Any notice required under this Agreement shall be in writing and delivered to the addresses set out at the head of this Agreement, or such other address as either Party may notify in writing, and shall be deemed received [ NOTICE DEEMED RECEIPT TERMS ]. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall continue in full force and effect, and the Parties shall negotiate in good faith to replace the invalid provision with one that achieves the original intent as closely as possible. This Agreement, together with its Schedules, constitutes the entire agreement between the Parties regarding the transaction and supersedes all prior discussions, negotiations, and understandings, whether written or oral. This Agreement may only be amended by written instrument signed by both Parties. This Agreement may be executed in counterparts, including by electronic signature, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date first written above. [ LIST OF PURCHASED ASSETS ] (itemise: equipment, inventory, intellectual property, contracts, goodwill, real property, or other specific assets, with sufficient detail to identify each item) [ LIST OF EXCLUDED ASSETS ] [ LIST OF ASSUMED LIABILITIES ] [ DISCLOSURE ITEMS ] (existing liens/encumbrances on Purchased Assets, pending or threatened litigation, and any other exceptions to the representations and warranties in Clause 6) This template is provided by My Legal Pal for general reference purposes only and does not constitute legal advice. Asset purchases involving significant value, cross-border parties, or, in India, a slump sale of a full business undertaking, should be reviewed and customised by a qualified lawyer before execution, given the tax, stamp duty, and regulatory implications involved. Need this tailored to your specific deal? Get Your Asset Purchase Agreement Drafted at MyLegalPal.com, or read our complete guide to Asset Purchase Agreements for an explanation of every clause above, including India's slump sale tax rules. This document is generated for informational purposes only and does not constitute legal advice. My Legal Pal recommends all agreements be reviewed by a qualified lawyer before signing.
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General
Asset Purchase Agreement
Asset Purchase Agreement
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ASSET PURCHASE AGREEMENT
Recitals
1. Definitions
2. Purchase and Sale of Assets
3. Purchase Price and Allocation
4. Assumed and Excluded Liabilities
5. Closing
6. Representations and Warranties of Seller
7. Representations and Warranties of Buyer
8. Indemnification
9. Employees
10. Non-Compete and Non-Solicitation
11. Confidentiality
12. Tax Matters
13. Regulatory Compliance
14. Further Assurances
15. Assignment
16. Dispute Resolution
17. Governing Law
18. Notices
19. Severability
20. Entire Agreement and Amendment
21. Counterparts
For [ SELLER NAME ]
Signature: ________________________
Name: [ SELLER SIGNATORY NAME ]
Title: [ SELLER SIGNATORY TITLE ]
Date: ________________________For [ BUYER NAME ]
Signature: ________________________
Name: [ BUYER SIGNATORY NAME ]
Title: [ BUYER SIGNATORY TITLE ]
Date: ________________________
Schedule A: Purchased Assets
Schedule B: Excluded Assets
Schedule C: Assumed Liabilities
Schedule D: Disclosures
Schedule E: Purchase Price Allocation
Asset Category Allocated Value [ ASSET CATEGORY 1 ] [ ALLOCATED VALUE 1 ] [ ASSET CATEGORY 2 ] [ ALLOCATED VALUE 2 ] [ ASSET CATEGORY 3 ] [ ALLOCATED VALUE 3 ] Total [ TOTAL PURCHASE PRICE ]
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Asset purchase vs share purchase: why the distinction matters
These are genuinely different instruments, not two names for the same transaction, and the difference changes the entire structure of the deal.
What transfers. In an asset purchase, only the specific assets named in the agreement transfer. In a share purchase, the buyer acquires the entire company, including every asset and liability, known and unknown, simply by acquiring its shares.
Liability exposure. An asset purchase lets the buyer selectively choose which liabilities to assume, leaving unwanted ones, including undisclosed or contingent ones, with the seller. A share purchase means the buyer inherits everything the company owes, whether or not it was disclosed during due diligence, which is exactly why share purchase agreements typically carry far more extensive representations, warranties, and indemnification provisions than asset purchase agreements do.
Contracts and consents. In an asset purchase, existing contracts, leases, and licences generally do not transfer automatically. The buyer typically needs the counterparty’s consent to assign each one individually, which can be a genuinely significant practical burden if the business holds many contracts. In a share purchase, contracts generally stay in place automatically, since the contracting entity itself has not changed, though change of control clauses inside those contracts can still be triggered.
Employees. In most jurisdictions, an asset purchase does not automatically transfer employees; the buyer typically needs to make new offers of employment. The United Kingdom and the European Union are a significant exception: under the UK’s TUPE regulations, implementing the EU’s Acquired Rights Directive, employees can transfer automatically with continuity of employment even in an asset or business transfer, not only in a share sale. A share purchase, by contrast, generally continues employment without any break, since the employing entity itself has not changed.
Key clauses an Asset Purchase Agreement should include
Purchased assets. A precise, itemised list of exactly what is being sold, equipment, inventory, intellectual property, contracts, goodwill, and any other specific assets. A vague or incomplete asset list is one of the most common sources of dispute after closing.
Excluded assets. Just as important as what is included: a clear list of assets the seller is specifically keeping, to avoid ambiguity about ownership after the deal closes.
Purchase price and allocation. The total consideration, and critically, how that price is allocated across the different categories of assets purchased. This allocation has real tax consequences for both parties and should be agreed and documented precisely, not left implicit.
Assumed and excluded liabilities. Exactly which liabilities the buyer is taking on, and an explicit statement that all other liabilities remain with the seller. This clause is the entire commercial point of choosing an asset structure, and it needs to be airtight.
Representations and warranties. Statements of fact the seller makes about the assets, the business, and its affairs, ownership of the assets free of encumbrances, accuracy of financial statements, absence of undisclosed litigation, and compliance with applicable law. Our guide on the contract clauses that quietly slash a company’s valuation during due diligence covers exactly how gaps in this area get discovered, and priced in, by a buyer’s legal team.
Indemnification. Which party bears financial responsibility if a representation turns out to be false or an excluded liability nonetheless materialises against the buyer. Our complete indemnity clause guide covers how this allocation actually works and interacts with any liability cap in the agreement.
Limitation of liability. A cap on the maximum financial exposure either party carries under the agreement, and whether indemnification obligations sit inside or outside that cap. Our guide on why not having a limitation of liability clause can seriously damage a business covers why this distinction matters so much in practice.
Employee matters. Whether the buyer is offering employment to any of the seller’s employees, on what terms, and how accrued entitlements such as leave and severance are handled. Our guide to employment contracts in India covers the compliance layer this needs to sit on top of.
Non-compete and non-solicitation. A restriction preventing the seller from starting a competing business or poaching customers and employees for a defined period after closing. Our guide on non-compete enforceability rules by state and country covers how narrowly this needs to be scoped to actually hold up.
Closing conditions. The specific conditions that must be satisfied before the deal actually completes, regulatory approvals, third-party consents to assign key contracts, and any other agreed pre-conditions.
Dispute resolution and governing law. How disputes between the parties get resolved, and which jurisdiction’s law governs the agreement.
Regulatory approval: the step most asset purchase templates skip
A sufficiently large asset purchase is not only a commercial transaction between the parties. In most major economies, it can trigger a legal requirement to notify a competition or antitrust regulator before the deal closes, and this applies to asset acquisitions, not only share deals or outright mergers.
United States. Under the Hart-Scott-Rodino Antitrust Improvements Act, sufficiently large asset acquisitions must be reported to the Federal Trade Commission and the Department of Justice before closing, with a mandatory waiting period observed. As of February 2026, the core size-of-transaction threshold is $133.9 million, adjusted annually.
United Kingdom. The Competition and Markets Authority can review an asset acquisition where the target’s UK turnover exceeds a defined threshold, or where the transaction would result in a 25% or greater share of supply of particular goods or services in the UK.
European Union. The EU Merger Regulation requires notification to the European Commission where the combined worldwide turnover of the parties, and the EU-wide turnover of at least two of them, exceed defined thresholds, regardless of whether the transaction is structured as an asset or share deal.
Whether a specific asset purchase actually triggers a notification requirement depends on its scale and the parties’ existing market position, and this should be assessed before signing, not after. A deal that should have been notified and was not can, in most of these regimes, be unwound by the regulator after the fact.
India: the slump sale rules that make asset purchases distinct
In India, an asset purchase covering an entire business undertaking as a going concern is treated as a specific, defined tax event, known as a slump sale, with its own dedicated compliance framework that a generic asset purchase template will not address.
Section 50B and the net-worth computation. Where a business undertaking is transferred as a whole for a lump-sum consideration, without individual values assigned to each asset and liability, it qualifies as a slump sale under Section 50B of the Income Tax Act. The resulting capital gain is computed with reference to the undertaking’s net worth as the cost base, not the individual assets. Under Rule 11UAE, two fair market values are computed, FMV1, based broadly on the book value of the undertaking’s assets, and FMV2, based on the actual consideration, and the higher of the two is treated as the deemed full value of consideration for the Section 50B computation. This means the price stated in the agreement is not always the final figure used for tax purposes, and getting this valuation mechanism wrong is a genuine, current area of tax authority scrutiny, with enforcement activity around slump sale reporting having increased materially through 2024 to 2026.
GST treatment. Where the transfer genuinely qualifies as a transfer of business as a going concern, it is generally treated as exempt from GST. The seller should issue a bill of supply rather than a tax invoice, and the buyer should ensure any unutilised input tax credit is properly transferred through Form GST ITC-02. Tax authorities have become notably more willing to challenge going-concern claims in recent enforcement cycles, examining evidence of genuine business continuity, ITC transfer mechanics, and whether employees actually migrated with the undertaking, so the underlying facts need to genuinely support the going-concern characterisation, not just the label used in the agreement.
Stamp duty. A slump sale or business transfer agreement attracts stamp duty under the relevant state’s Stamp Act, and the rate and valuation basis vary genuinely by state. Getting the stamping wrong is not a minor administrative slip; incorrect or insufficient stamping can attract a penalty running up to several multiples of the duty that should have been paid, separate from any income tax or GST exposure. This should be scoped state by state, and asset by asset where immovable property is involved, before the agreement is drafted, not after.
Corporate approvals. Where the transfer covers substantially the whole of a company’s undertaking, board and shareholder approval is required under Section 180(1)(a) of the Companies Act, 2013, a step that is easy to overlook when the deal is being driven primarily as a commercial and tax exercise. Our company registration and compliance service can help structure and document an Indian asset purchase or slump sale correctly against all of these requirements from the outset.
Where this fits with your other business documents
An asset purchase agreement typically sits alongside a broader due diligence process, so our guide on the specific clauses that quietly slash valuation during due diligence is worth reading before you finalise price and allocation. If the sale is tied to a founder or key employee exiting the business, our guide on what happens to equity when a co-founder leaves covers that adjacent question, and our broader guide on what should be included in every business contract covers the underlying drafting discipline that keeps an agreement like this enforceable.
Frequently asked questions
What is the difference between an asset purchase and a share purchase?
In an asset purchase, the buyer acquires specific, named assets of a business, and can choose which liabilities to assume, leaving the rest with the seller’s continuing entity. In a share purchase, the buyer acquires the company itself by buying its shares, taking on every asset and liability, known and unknown, since the company continues exactly as it was, just under new ownership.
Do employees automatically transfer in an asset purchase?
In most jurisdictions, no, the buyer typically needs to make new offers of employment. The United Kingdom and European Union are a significant exception: under the UK’s TUPE regulations, implementing the EU’s Acquired Rights Directive, employees can transfer automatically with continuity of employment even in an asset or business transfer, not only in a share sale.
What is a slump sale in India?
A slump sale is the transfer of an entire business undertaking as a going concern for a lump-sum consideration, without individual values assigned to each asset and liability. It is a specific tax concept under Section 50B of the Income Tax Act, with its own capital gains computation based on the undertaking’s net worth, distinct from an itemised asset sale where individual assets are separately valued and priced.
Does GST apply to an asset purchase in India?
Generally not, where the transfer genuinely qualifies as a transfer of business as a going concern. Where it does not, for example where only selected assets are being sold rather than a functioning business unit, GST can apply to the transfer of those individual assets. Tax authorities have increasingly scrutinised going-concern claims, so the underlying facts need to genuinely support that characterisation.
Why would a buyer prefer an asset purchase over a share purchase?
The main reason is liability control. An asset purchase lets a buyer selectively acquire only the assets it actually wants and explicitly leave unwanted or undisclosed liabilities with the seller, which is a meaningfully lower-risk structure than a share purchase where every liability, disclosed or not, transfers with the company.
Need an asset purchase agreement drafted for your specific deal?
A template is a starting point, not a finished document. The clauses that actually protect you, asset and liability allocation, representations and warranties, indemnification, and, in India, the slump sale tax and stamp duty position, need to be tailored to your specific transaction and jurisdiction. My Legal Pal drafts and reviews asset purchase agreements for businesses across India and internationally.
Get Your Asset Purchase Agreement Drafted at MyLegalPal.com, or speak to our contract lawyers in India or the USA about your specific deal. You can also download the free Asset Purchase Agreement template as a starting point.
