Before completing an asset purchase agreement, prudent purchasers include conditions precedent to ensure certain essential requirements are met. These safeguards protect their interests, mitigate risks, and pave the way for a successful acquisition. In this blog post, we’ll explore the typical conditions precedent that purchasers seek to assert in an asset purchase agreement to make well-informed and secure investment decisions.
Reviewing Contractual Obligations: An important condition precedent involves the review of material contracts related to the target business. Purchasers want to ensure that all contracts have been disclosed and that there are no existing breaches or defaults that could impact the acquisition.
Due Diligence: Another key condition precedent is conducting thorough due diligence. This involves an in-depth assessment of the asset. In the case of real estate, due diligence could include an appraisal, geotechnical engineering reports and an environmental assessment. In the case of equipment, the purchaser may want an evaluation completed to determine its operating condition.
Obtaining Consents and Approvals: To ensure a smooth transition, purchasers want confirmation that the seller has obtained all necessary consents, approvals, and permits required for the transfer of assets and ongoing business operations. This includes approvals from regulatory bodies and third-party stakeholders.
Clear Title and Ownership: Purchasers seek assurance that the assets being sold have clear title, free from any encumbrances or disputes.
If you’re not sure if all of your obligations and rights have been met or are fair and legal during the course of purchasing or selling a business or commercial property contact Heath Law on Vancouver Island.
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