Summary: Buying shares is very simple conceptually; the buyer simply buys the stock of your business directly from the shareholders. The name of your company, operations, contracts, etc., remains intact, only with new owners. The purchaser buys the target`s stock and takes the objective as it is found, both in terms of assets and liabilities. Most contracts that have a purpose – such as leasing and permits – are automatically transferred to the new owner. For all these reasons, it is often easier to go with a stock purchase than with a purchase of assets. Depending on whether an acquisition is structured in the form of asset sales or share sales (or mergers), there are significant differences between the securities of the transaction. A substantial portion of an asset acquisition contract is used to identify assets to be acquired and liabilities to be accepted by the purchaser. As a general rule, the buyer wants the asset purchase contract to exclude the buyer from obligations other than the debts expressly assumed. If the provisions describe acquired assets and liabilities are carefully written, the seller`s insurance and guarantees may be limited to focusing on items that have or are likely to affect those assets and liabilities. In addition to an asset purchase agreement, other ancillary agreements are required to transfer assets from seller to buyer. These include a sale invoice, transfer and acquisition agreements, transfer orders and bids for changes to the company`s name, as well as agreements to hire the company`s staff by the purchaser. The main sections of the share purchase agreement are as follows. Sellers should pay particular attention to the purchase and sale of shares, as well as to the representations and guarantees section.
The oil and gas industry does not distinguish between an asset and the purchase of shares when it designates its corresponding sales contract. In this sector, whether it is the purchase of assets or shares, the final agreement is called the Purchase and Sale Contract (PSA). The sale of shares is often preferred by the owners of a sales company, because in general, all known and unknown liabilities of the business are transferred to the buyer and the sellers therefore avoid permanent exposure to such liabilities (unless explicit agreement with the buyer). Buyers often object to a share sale transaction, unless the business to be acquired has its own operating history or there are significant practical difficulties in carrying out an asset sale, such as restrictions on the transfer of certain assets of the entity selling to the purchaser or the incriminating third-party consents necessary for the transfer of assets.