A business or asset sale is the transfer of assets which make up a business
from a buyer to a seller. Whilst the standard business purchase agreement
template (BPA) does not include a guarantee, this template adds a
guarantee, which will usually be put in place at the request of the buyer.
A guarantee provides additional comfort and security to a buyer in relation
to the assets or business that they are buying. This template has been
drafted so that the guarantor will guarantee the performance of the seller
under the BPA and indemnify the buyer against all costs associated with any
failure of the seller to comply with the terms of the BPA. However, the guarantee has also been drafted so as to be limited in time and amount. This can be adjusted
according to the needs of customers using the template.
The guarantor may be a private individual or a corporate entity such as a
limited company, however it is important that the guarantor is a person or
entity that is able to legally and financially give the guarantee and the
buyer should satisfy itself as to this. If the guarantor is a corporate
entity, it may be necessary for the buyer to check their constitutional
documents to ensure the guarantor has the express power to provide a
guarantee. The buyer should also ensure that the guarantor is able to
warrant the information in relation to the business or assets in the same
way as the seller.
A guarantee must be in writing (or evidenced in writing) and signed by the
guarantor or a person authorised by the guarantor (section 4, Statute of
Frauds 1677) and this template includes nominal consideration from the
buyer to the guarantor to cover any argument about whether good
consideration has been given as this template is not proposed to be signed
as a deed.
In all other respects the provisions of this template are the same as for
the standard BPA template. Customers should note that this template
includes short form, basic warranties, which may need to be extended
depending on the transaction in question. The template also does not
include tax provisions (except limited VAT provisions) or tax warranties.
Independent tax advice must be sought.
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