As a business owner, entering into a stock purchase agreement is an important step in the sale of your company. This agreement sets out the terms of the sale, including what assets and liabilities are included in the purchase price. However, not all assets are included in a stock purchase agreement. These assets are known as excluded assets.
Excluded assets are assets that are not included in the purchase price of the company. These assets may be retained by the seller or sold separately to a third party. The purpose of excluding assets from a stock purchase agreement is to limit the buyer’s exposure to potential liabilities associated with those assets.
Excluded assets can include a wide range of items, such as:
1. Cash and cash equivalents – these are typically excluded from a stock purchase agreement as the buyer is not purchasing the seller’s cash balance.
2. Intercompany accounts – these are accounts between the seller and its subsidiaries that are not included in the sale.
3. Intellectual property – specific intellectual property assets may be excluded from the sale, such as trademarks or patents that are not necessary for the buyer to operate the business.
4. Prepaid expenses – these are expenses that have been paid in advance and are not included in the sale.
5. Deferred revenue – this is revenue that has been received by the seller but has not yet been earned and is excluded from the sale.
6. Real estate – if the seller owns the real estate that the business operates from, it may be excluded from the sale and sold separately.
7. Employee benefits – certain employee benefits, such as pensions or retirement plans, may be excluded from the sale as they are not necessary for the buyer to operate the business.
It’s important to note that excluded assets may vary depending on the specific circumstances of the sale. The buyer and seller will negotiate and determine what assets are excluded and included in the stock purchase agreement.
It’s also important to have a clear understanding of what assets are excluded from the sale as this can impact the price negotiated for the purchase of the company. For example, if the seller retains ownership of the real estate, the price of the company may be lower as the buyer is not acquiring the property.
In conclusion, excluded assets are an important aspect of a stock purchase agreement. They are assets that are not included in the purchase price and may be retained by the seller or sold separately. Understanding what assets are excluded from the sale is crucial to negotiating a fair price for the purchase of the company. As always, it is recommended to consult legal and financial professionals when entering into a stock purchase agreement.