What is an asset and liability transaction agreement? Explanation and use

What is an asset-liability transaction agreement? It is the contract by which you acquire a business by purchasing the individual assets and liabilities, rather than the company's shares. You are therefore buying the business itself — machinery, inventory, customer contracts, trade name — and not the legal shell surrounding it. This is also known as an asset deal. It is the standard form of acquisition for sole proprietorships, general partnerships (VOFs), and private limited companies (BVs) where the buyer only wants the healthy parts.

The short answer

• What: a purchase agreement for the individual assets and liabilities of a company (asset deal), not a share transfer.
• You are buying: assets such as inventory, stock, goodwill, trade name, and contracts — and sometimes debts.
• You are not buyingthe company itself; that remains with the seller.
• Major advantage: you choose for each component what to keep and what not (cherry-picking).
• Major point of attention: for personnel, the “transfer of undertaking” (Art. 7:662 et seq. of the Dutch Civil Code) applies — this transfers automatically.
• When: standard for sole proprietorships and general partnerships; for private limited companies if the buyer wishes to avoid risks from the past.

What exactly is an asset-liability transaction?

In an asset and liability transaction, the entrepreneur does not sell the business as a whole, but rather its individual components. The buyer and seller agree in the contract precisely on which assets and liabilities are transferred. Everything not listed remains with the seller.

That is the essential difference compared to a share transaction: in that case, you buy the BV in its entirety, including everything inside it — both known and unknown. In an asset deal, you cherry-pick the essentials. You take the machinery, the inventory, and the customer list, but leave, for example, an ongoing dispute or an old tax debt with the seller.

Which assets and liabilities are transferred?

The agreement lists exhaustively what is being purchased. Typical items:

• Tangible assets: inventory, machinery, stock, fixed assets.
• Intangible assets: goodwill, trade name, trademark rights, domain names, customer base.
• Contracts: lease agreement, supplier contracts, ongoing customer orders — provided the counterparty cooperates (assignment of contract, Art. 6:159 BW).
• Debtors: outstanding claims against customers (via assignment, Art. 3:94 BW).

Liabilities (debts) are only transferred if the parties agree to this and the creditor consents (assumption of debt, Art. 6:155 BW). Often, the buyer specifically does not want to assume any debts — an important reason to choose this form.

Transfer of undertaking: staff transfer automatically

This is where the biggest pitfall lies. If you acquire an enterprise (or an independent part thereof) that retains its identity, this constitutes a “transfer of undertaking” within the meaning of Article 7:662 et seq. of the Dutch Civil Code. In that case, all employees transfer to the buyer by operation of law, along with their existing terms of employment, seniority, and rights.

You cannot exclude this contractually. A collective labour agreement that applied to the seller also remains applicable in principle. The buyer therefore cannot select or dismiss employees because of the transfer. This makes personnel a special category: while you are free to choose regarding assets, a mandatory protection scheme applies to employees.

Difference from a share transaction

The two forms of acquisition side by side:

• Selective vs. all-in-one: with an asset deal, you choose per component; with a share deal, you get the entire BV with all its history.
• Risk: an asset deal leaves hidden debts and claims with the seller; a share deal includes them (covered by warranties and indemnities).
• Tax: in the case of a share sale, the participation exemption may apply to a selling holding company; an asset deal often results in taxable profit for the seller, but offers the buyer depreciation potential on goodwill.
• Contracts: in a share deal, contracts simply continue (the BV remains a party); in an asset deal, you must actively transfer contracts.

Practical example

An installation company wants to acquire the customer base and van of a competitor who is closing down. However, the competitor also has an ongoing dispute with a supplier. Through an asset-liability transaction, the installation company purchases the goodwill, the van, the inventory, and the four technicians (who transfer by operation of law) — but not the BV and not the dispute. That remains with the seller. In this way, the buyer acquires the healthy core without the risk from the past.

Honest recommendation

An asset-liability transaction is attractive because you can exclude risks, but execution requires careful attention: contract assignment requires the cooperation of third parties, debt assignment requires the consent of creditors, and personnel are mandatorily transferred. An error in the description of what you are buying can mean that a crucial contract or customer relationship is not included.

When do you not need a lawyer? For a very small acquisition without personnel, without debts, and without important ongoing contracts — for example, just some inventory and a customer list — a simple purchase agreement will suffice. As soon as personnel, a lease, or goodwill are involved, legal review far outweighs the costs.

Read more: view the asset-liability transaction agreement, or read how to draft the agreement yourself and when to have an agreement drafted.

Frequently Asked Questions