When the shares of the company that run the business are acquired, it is normally the buyer`s lawyers who prepare the first documentation. This is because there will be important guarantees and compensations in the documentation to protect the buyer, which makes it useful for his lawyer to prepare them. When the transaction is structured into shares, the acquisition naturally results in a transfer of ownership of the entity itself, but the entity retains the same assets and has the same liabilities. When buying shares, the buyer acquires shares in a company that may have unknown or uncertain debts. If the company is not listed on the stock exchange, it may be more difficult for a buyer to evaluate the shares of a company he wants to buy. In addition, the seller can go into a stock purchase after closing the transaction without liability. When entering into a share acquisition transaction, the shareholders of the target company participate in the transaction and must approve the sale process, which may thwart or delay the transaction in the absence of a majority agreement required among shareholders. Buying shares is easier in the concept than buying assets. Therefore, in most cases, it is essentially a simpler, less complex transaction.
But in asset purchases, the buyer does not receive preferential tax treatment, as the acquisition of assets cannot be considered a tax-exempt reorganization. Asset Purchase Here, the buyer “chooses” the items or assets of the company he wants to buy. It is important to determine exactly what is selected; such as machinery, warehouses, work in progress, premises, contracts, value, etc. It is equally important to determine which positions are not purchased, such as existing creditors and debtors. The goal behind the surviving company`s desire to buy the target company (whether by buying its shares or buying its assets) is the one that generally dictates the type of transaction that the surviving company wants to make. In direct relation to the required authorizations mentioned in the previous chapter, this difficulty, if it is a known difficulty in making a decision on the board of directors or the shareholders` meeting of the target company, may cause the surviving company to move forward with a transaction that is easier to conclude internally within the target company.