Business Purchase Agreement with Guarantee

A business or asset sale involves the seller transferring the assets that make up a business to the buyer. This Business Purchase Agreement with Guarantee is based on the standard Business Purchase Agreement, but adds a guarantee (typically at the buyer’s request) to provide additional comfort and security.

What does Business Purchase Agreement with Guarantee do?

It documents a business/asset sale and includes a guarantee under which a guarantor supports the seller’s obligations under the agreement.

What does Business Purchase Agreement with Guarantee cover?

• A guarantee of the seller’s performance under the Business Purchase Agreement, together with an indemnity for costs associated with any failure by the seller to comply with its obligations.
• A guarantee drafted to be limited in time and amount, which can be adjusted depending on the transaction.
• Provision for the guarantor to be an individual or a corporate entity (for example, a limited company), subject to the guarantor having the legal and financial capacity to give the guarantee.
• A requirement for the guarantee to be in writing (or evidenced in writing) and signed by the guarantor (or an authorised signatory), reflecting section 4 of the Statute of Frauds 1677.
• Nominal consideration from the buyer to the guarantor, as this guarantee 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 Business Purchase Agreement.

This template includes short-form, basic warranties, which may need to be extended depending on the transaction.

When should you use Business Purchase Agreement with Guarantee?

Use this agreement where a buyer requires additional contractual security for the seller’s obligations in a business/asset sale, and a suitable guarantor is available.

Where the guarantor is a corporate entity, the buyer may need to check the guarantor’s constitutional documents to ensure it has the power to provide the guarantee. The buyer should also consider whether the guarantor is able to warrant information about the business or assets in the same way as the seller.

Key tax point

Other than limited provisions related to VAT, this template does not include tax provisions or tax warranties. Independent tax advice must be sought.

Business Purchase Agreement with Guarantee is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.