Asset Sales

What do asset sales entail?

Asset sales involve the sale of a company’s tangible or intangible assets rather than the sale of the company itself. Asset sales can occur for various reasons, such as divestiture of non-core assets, raising capital, or liquidation during dissolution.

One example of when corporate executives or boards of directors may require counsel on asset sales is when a company is undergoing restructuring and needs to sell off non-core assets to focus on its primary business. Another is during a company’s dissolution, which often requires an asset sell-off to pay off debts and distribute the remaining proceeds among shareholders. In both examples, legal counsel can help navigate the complex regulatory landscape and ensure compliance with Florida and federal laws.

Need help with a matter related to asset sales? Schedule your consultation today with a top corporate governance and operations attorney.

Which Florida and federal laws and regulations apply to asset sales?

Various laws and regulations govern asset sales in Florida. For example, the Florida Business Corporation Act (Chapter 607, Florida Statutes) provides guidance on asset sales for corporations. For LLCs, the Florida Revised Limited Liability Company Act (Chapter 605, Florida Statutes) is applicable, while the Florida Revised Uniform Partnership Act (Chapter 620, Florida Statutes) governs partnerships.

In addition to these state-specific laws, federal laws such as the Securities Act of 1933 and the Securities Exchange Act of 1934 may also apply, mainly when asset sales involve securities transactions.

What are common issues regarding asset sales that lead to litigation?

The following issues are among the most common in litigation involving asset sales:

• Breach of Contract: Disputes may arise when one party alleges that the other party failed to fulfill its obligations under the asset purchase agreement, such as failing to transfer the assets or pay the purchase price.
• Misrepresentation: Litigation can occur when a party claims that the other provided false or misleading information about the assets or the business during negotiations, leading to a detrimental decision.
• Fraudulent Conveyance: If the asset sale is made with the intent to hinder, delay, or defraud creditors, it can lead to litigation under Florida’s Uniform Fraudulent Transfer Act (Chapter 726, Florida Statutes).
• Employment Issues: Disputes may arise when employees’ rights are not adequately addressed during the asset sale, such as issues related to employee transfers or terminations.
• Intellectual Property Disputes: Conflicts may arise over the ownership, transfer, or licensing of intellectual property, such as trademarks, patents, or copyrights, during an asset sale.

What are effective measures to minimize the risk of litigation over asset sales?

Implementing the following may help mitigate risk:

• Conduct Thorough Due Diligence: Investigate the target business’s assets, liabilities, and other relevant aspects to identify potential risks and uncover any misrepresentations or inaccuracies.
• Draft Clear and Comprehensive Agreements: Ensure that the asset purchase agreement is well-drafted, with transparent terms and conditions that define each party’s responsibilities, representations, and warranties.
• Obtain Proper Legal and Financial Advice: Engage experienced legal and financial advisors to assist with the transaction and ensure compliance with all applicable laws and regulations.
• Address Employee and Intellectual Property Rights: Properly address the transfer of employees and intellectual property rights, ensuring all necessary consents and licenses.
• Maintain Open and Transparent Communication: Keep communication channels open between the parties throughout the transaction process to address any concerns, misunderstandings, or disputes as they arise.
• Include Dispute Resolution Clauses: Incorporate dispute resolution mechanisms, such as mediation or arbitration, in the asset purchase.

When a set of facts is appropriate to meet litigation requirements, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

Frequently Asked Questions

1. What types of assets are typically in an asset sale?

An asset sale may include tangible assets such as real estate, equipment, inventory, and vehicles and intangible assets like intellectual property, customer lists, and goodwill.

2. How are tax implications considered in an asset sale?

In an asset sale, the seller is generally taxed on the difference between the sale price and the asset’s tax basis. Buyers can benefit from a step-up in the tax basis of the assets, allowing for greater depreciation deductions. Consultation with tax advisors or attorneys helps understand and address the tax implications of an asset sale.

3. Can liabilities be transferred in an asset sale?

Generally, the buyer does not assume the seller’s liabilities in an asset sale unless explicitly agreed upon. However, certain liabilities, such as environmental or tax liabilities, may still be transferred to the buyer under specific circumstances. Due diligence and a well-drafted asset purchase agreement can help mitigate potential risks associated with these liabilities.

Have more questions about governance or operations for your business?

Crucially, this overview of asset sales does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.