Tax issues play an important role in structuring a transaction. In general, the tax benefits of selling shares to a seller (especially if the seller is an individual) should be far greater than the tax benefits of selling shares to a buyer. Conversely, for the buyer, the sale of assets is often tax efficient than the seller. You will find a more detailed analysis of the tax impact of a share sale in relation to a sale of assets in our tax considerations. After the sale of assets, the ownership of the target company does not change and the objective remains. Once the target company has sold all of its business, it will now be a “Cash Shell” – a company with no assets other than cash income from the sale of assets. However, when selling or buying a software business, the structure is the same as for other business sales: if the business is managed through a company, the choice is between a sale of shares and a sale of assets. Although the two structures are able to achieve the same overall business objective, there are fundamental differences in both the legal effectiveness and the tax treatment of the two methods. The tax is usually the main driver, but legal considerations can also be important.
The documents and processes required to sell assets are often more complex than for the sale of shares, particularly in the case of companies such as software, where the most important assets are intangible assets, such as intellectual property and licensing rights. They need separate documents to complete their transfer. In other industries, it is likely that more consents and authorizations will be required than for the sale of shares (where changes in control restrictions are the main problem); z.B. the landlord`s agreement for the sale of rental properties and, if applicable, the agreement of any software provider or owner regarding the product. The purchase price of the smallest business`s assets consists of a certain amount in cash at closing, a subordinated note that remains younger than the priority debt of the acquired objective, and interest payments to selling capital providers in the form of interest, assuming that certain net performance targets are achieved during the performance period. Examples of assets found in an APA are: in theory, there is greater flexibility for the buyer when acquiring assets, as he can “choose” which assets and liabilities to be purchased, but in practice, unless the seller is in financial difficulty or in a bad trading position, most sellers (especially individuals) prefer stock sales since the tax advantages largely predominate over the underlying assets to asset sales (see below for more details). If sellers do not receive a share sale, they will at least want to transfer all assets and liabilities in order to obtain, as far as possible, a “clean break” when selling. Due Diligence: In the context of an asset sale or share sale, a buyer wants information about the transaction. This collection of information is called due diligence.