The number one consideration for anyone buying or selling a business is price. But getting the best price is not just about the total cash value. How the purchase price is allocated across the various assets included in the deal has significant implications for the future tax liabilities of both purchasers and sellers. This article discusses some of the major considerations for purchasers and sellers in deciding how to allocate the purchase price in asset purchase agreements, and recent proposed changes to the tax treatment of goodwill which may alter the current allocation preferences of the purchaser and seller.
Over the past year, we have seen the Companies’ Creditors Arrangement Act (the CCAA) used in a novel way to execute prearranged sale transactions of distressed companies’ assets, potentially indicating a new manner in which companies and their advisors are using the CCAA.
In the typical asset sale under the CCAA, the applicant company obtains an order from the presiding court approving a competitive sale or auction process for the assets in question (be they all or only part of the assets of the company). The sale process is run by the court-appointed monitor (normally the restructuring specialists at … Continue Reading