How Do Lease Assignments and Other Ancillary Agreements Work When Buying or Selling a Business?

Typically, the purchase agreement will contemplate other agreements that are either included as exhibits or negotiated between signing in closing — so-called “ancillary agreements” or “ancillaries” for short These may include:

Lease Documents
An assignment of the existing lease or entering into a new lease (especially if the seller separately owns the property used by the business).

Employment and Other Agreements
If key managers will remain after the transaction (potentially including the seller), appropriate transition / consulting agreements or employment agreements will be needed.

General Assignment
In an asset deal, a general assignment agreement will be needed to transfer rights to the new owner.

Loan Documents
If seller financing is involved, a promissory note along with accompanying security and guarantee agreements, as well as appropriate state UCC filings.

Specialized Agreements
Sometimes, specialized or industry-specific agreements are required. For example, in the sale of professional practice, a records custody agreement is usually involved.

Other Aspects

Many deals also involve:

Shareholder Approval
Equity holder approval to enter into and consummate the transaction, and formal records documenting that approval (minutes and resolutions or written consent).

Acquisition Entity Formation
Especially in asset deals, the formation of a new business entity (LLC, corporation, etc.) to hold the purchased assets.

Non-Disclosure Agreement
Entering into a standalone non-disclosure agreement (NDA) in connection with the diligence process.

HR Issues
Deciding which employees will be retained, and carrying out post-closing hirings and terminations.

Ownership Arrangements
If the buyer comprises multiple owners, an appropriate shareholder or operating agreement may be needed to set out the rules for the newly purchased business.


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