Asset sale vs share sale: the key differences explained

What is an asset sale?

An asset sale is a way in which a buyer can purchase particular assets of a business, and can choose which assets (and liabilities) it wishes to purchase. This means that the buyer can be selective about the assets it is acquiring, and the risks that it will be taking on. “Assets” means things like equipment, stock, intellectual property rights, software and contracts.

Not all assets and liabilities of a business will be transferred to the buyer - instead, the asset sale agreement will include a schedule that clearly sets out exactly what assets are being transferred to the buyer on completion of the transaction. This means that the seller remains owner of, and liable for, the assets and liabilities that do not transfer to the buyer. This can be advantageous to sellers where the seller wants to retain ownership of certain assets that are not part of the transaction.

An example of an asset sale in practice could be if a business has multiple product or service lines, and only one of those product / services lines is being sold. An asset sale would allow all staff, equipment, inventory, and intellectual property associated with that product / service line to be sold, whilst all other assets remain with the seller in the business.

What is a share sale?

With a share sale, a buyer will usually purchase the entire issued share capital of a company from the existing shareholder(s).

When a buyer purchases the share capital of a company, it acquires all of that target company’s assets, liabilities and obligations, regardless of whether the buyer or target company is aware of them. The buyer becomes the new owner of the entire entity, including all its assets and liabilities.

What are the main differences of an asset sale vs share sale?

The exact implications of an asset sale vs share sale will vary depending on the particular transaction, but the table below lists some common attributes of, and differences between, asset sale vs share sale:

Overall, the choice between an asset sale vs share sale will depend on various factors, including the buyer's specific objectives, risk tolerance, and the structure of the transaction.

When do I need to use an asset sale agreement?

If you are purchasing (or selling) a business’s assets, it is important to document that sale via an asset sale agreement. For more information about asset sale agreements, read this comprehensive guide.

How can Docue help?

Docue’s asset sale agreement template is fully customisable and can be easily tailored to suit your transaction. There are lawyer-drafted guidance notes and tips to help you through the contract creation process, so you can create a bespoke asset sale agreement in no time at all.

Sign up now to use Docue’s asset sale agreement template.