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A buyer of business will invariably want to carry out some form of due diligence on the target business. In the case of an asset sale where no liabilities are transferring to the seller, this is often limited to ascertaining that the seller has good title to the assets being transferred whereas if the assets constitute a trading business, more detailed due diligence may be advisable.

Therefore, it is important for a seller to be able to supply the requisite supporting documentation to demonstrate that it is in fact the owner of the assets that make up the target business.

If there are contracts that are material to the target business, the buyer is also likely to want to see copies of those contracts and to ascertain whether there are any changes of control clauses or any reasons why the third party would not be willing for those contracts to transfer to the buyer.

From a commercial perspective, the level of due diligence depends upon whether individual assets or a trading business is being acquired. Even if assets and/or contracts are being acquired TUPE may apply and the buyer may become legally responsible for a team of employees – see TUPE.


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