Heads Of Terms (Asset Sales)

These Heads Of Terms (Asset Sales) can be used where a buyer and seller have agreed the principal terms of an asset (or business) sale and want to record them in writing at an early stage.

The aim is to reduce misunderstandings, flush out deal issues early, and avoid wasted time and costs while the main agreement is negotiated.

What does Heads Of Terms (Asset Sales) do?

It sets out the headline commercial and legal terms for an asset/business sale. Heads of terms are commonly intended to be largely non-binding, although it is common for certain provisions (such as confidentiality) to be binding.

What does Heads Of Terms (Asset Sales) cover?

• The parties and basic deal structure, including options relevant where there is more than one seller and where the business has subsidiaries.
• A description of the assets included in the sale and those excluded.
• The intended approach to liabilities, including whether creditors are to be assumed by the buyer.
• Price and payment terms, including VAT provisions and how VAT records are to be dealt with (noting that the position can be complex).
• An outline of how key contracts are to be transferred.
• TUPE provisions and the intended approach to TUPE consultation.
• Optional provisions for real property (where relevant).
• Warranties and how they may be qualified, assignment of certain third-party assets, and post-completion restrictions such as non-solicitation and non-competition.
• An anticipated completion date, and terms dealing with confidentiality, responsibility for costs and due diligence procedure (which are stated to be legally binding).

When should you use Heads Of Terms (Asset Sales)?

Use these heads of terms once the principal deal points have been agreed in outline, and before committing to the full Business Purchase Agreement and related transfer documentation.

They may also be useful where the parties want the heads of terms to sit alongside an existing confidentiality agreement, with the heads of terms expressed to be subordinate to that agreement.

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