Heads of Terms (Asset Sale)

What is a Heads of Terms (Asset Sale) and when should you use it?

Heads of Terms (Asset Sale) are used when a buyer and seller have agreed the principal terms of an assets (or business) sale agreement and wish to put them in writing to avoid future misunderstandings and identify any pitfalls at an early stage of negotiations.

This will avoid wasting time and costs.

Most heads of terms will not be legally binding, but it is quite common for some terms, such as confidentiality, to be an exception.

They are the first step on the path to a business sale or purchase.

These Heads of Terms (Asset Sales) are a fairly standard set of terms for an asset (or business) sale.

Heads of Terms can also be referred to as Heads of Agreement.

By design, this document is not comprehensive enough to cover all the necessary details involved in a binding formal agreement.

But its lack of detail is also its strength because it allows for broad consensus on the proposed terms.

It also shows the commitment by both parties and acts as a guideline to negotiating a formal agreement.

These terms include a list of the assets included in the sale as well as those which are excluded (and an option to add more included and excluded assets is available).

What else might you need?

Once you have agreed the principal terms of a share purchase agreement the next stage in the process should be the due diligence.

Due diligence is the process of investigation into the financial, tax and sometimes commercial affairs of a business being sold.

You will find our due diligence enquiries template useful for this.

Once you have completed your due diligence the next stage in the process is the drafting of a formal business sale and purchase agreement.

You can find our simple business sale and purchase agreement here 

You may be required to share confidential information with the potential buyer.

We recommend that before you share any confidential information about your business you get a confidentiality agreement to protect it.

Use our confidentiality agreement to get the protection you need.

You may also need what is a called a disclosure letter.

This is a letter issued to the Buyer prior to completion of the sale and is designed to protect the Seller from future claims by the Buyer.

You can find our disclosure letter here