Which assets does the buyer acquire, and which liabilities stay with the seller?
Commentary recommends that an asset purchase agreement make very clear which assets are included and which are excluded, and the agreement assigns responsibility between the parties for the seller's obligations, which one filed agreement does by listing the liabilities the buyer assumes and leaving every other liability with the seller. On a touch screen, a tap shows all 3 sources in this group.
The four defined categories below take their definitions from one filed asset purchase agreement for a supplement business, as examples of negotiated drafting rather than required wording:
| Category | Definition |
|---|---|
| Purchased assets | The assets the buyer acquires. The filed agreement defines its acquired assets as all of the seller's assets other than the excluded assets. |
| Excluded assets | The assets the seller keeps. The filed agreement excludes the assets listed on a schedule and states that the excluded assets include the seller's cash. |
| Assumed liabilities | The seller's liabilities that the buyer agrees to take on. The filed agreement limits them to the liabilities listed on a schedule. |
| Retained liabilities | Every other liability of the seller. The filed agreement leaves them with the seller whether they arise before, on or after closing and whether or not they were disclosed. |
An assumed obligation can be identified by its contract type and the period it covers: one filed agreement for an online publishing business made the buyer responsible for fulfilling job listings and subscriptions sold before closing, listed those obligations on a schedule, and included refunds to subscribers who cancel.
The following synthetic example illustrates choices for the purchase of a small software-as-a-service business, not observed terms or a mandatory allocation:
| Item | Decision the parties need to express |
|---|---|
| Cash and receivables | Whether the seller keeps bank balances, pre-closing receivables and payouts still pending with the payment processor, or the buyer acquires specified amounts. |
| Code and repositories | Which repositories and deployment configurations transfer, and whether any code belongs to a contractor or is licensed from a third party (contractor-owned code, website or app migration). |
| Domains | Which domain names transfer and from which registrar account (domain transfer). |
| App-store registrations | Which app listings transfer and whether the buyer's developer account can receive them (app transfer). |
| Hosting, SaaS and provider accounts | Which accounts transfer whole, which are shared with the seller's other businesses and need separating, and which the buyer replaces (account migration, shared accounts, handover check). |
| Prepaid subscriptions and refunds | Whether the buyer serves annual plans paid before closing and who bears refunds and chargebacks (customer obligations). |
| Customer data and records | Which customer records transfer, subject to privacy-policy and data-use restrictions (customer data). |
| Supplier and customer contracts | Which agreements are included and which need a counterparty's consent to assignment (contract consents). |
A general grant of the seller's assets can miss an asset the business uses but the seller does not hold, such as intellectual property held by an owner or an affiliate; one filed agreement addresses that gap with a representation that no affiliate of the seller has an interest in intellectual property used in or necessary for the business, other than as scheduled. The schedules question addresses how specific each list needs to be, lien review addresses encumbered assets, and contract consents addresses assets that cannot move without a third party.
A contractual allocation between buyer and seller does not by itself answer what rights a third party has, because the seller's creditors are not parties to the asset purchase agreement and, outside sales governed by bankruptcy-court orders and other judicial sales, are not bound by it. Third-party exposure is a separate review; this guide does not determine successor liability in any particular state, industry or transaction, and the successor-liability question describes the general rule and its recognized exceptions.
Sources for this answer
Imke Ratschko supports clearly describing which assets are included and which are excluded.
So I recommend that the description makes it very clear which assets are included, and which are excluded.
See Imke Ratschko, The Basics of an Asset Purchase Agreement, Ratschko PLLC (July 25, 2022; updated July 28, 2022).
Samuel D. Hodson supports that an APA assigns responsibility between the parties for the seller’s obligations.
The asset purchase agreement assigns responsibility between the parties for the seller’s obligations.
See Samuel D. Hodson, Successor Liability Risks in Asset Purchase Agreements, Taft Law Bulletins (June 26, 2020).
The Grove agreement defined its acquired assets as all of the seller's assets other than the excluded assets.
The term "Acquired Assets" means all assets of the Seller, other than the Excluded Assets.
See §2.1(a)
The Grove agreement excluded the assets listed on its Schedule 2.1(b) and stated that the excluded assets include the seller's cash.
Notwithstanding anything to the contrary in this Agreement, the Acquired Assets shall not include the assets, properties and rights of Seller set forth on Schedule 2.1(b) hereto (collectively, the “Excluded Assets”). The term Excluded Assets includes without limitation cash of Seller.
See §2.1(b)
The Grove agreement limited its assumed liabilities to the seller liabilities listed on Schedule 2.2(a).
“Assumed Liabilities” means only those Liabilities of Seller set forth on Schedule 2.2(a), which includes a list of the assumed accounts payable of Seller.
See §2.2(a)
The Grove agreement left every seller liability other than the assumed liabilities with the seller, whenever it arose and whether or not it was disclosed.
With the sole exception of the Assumed Liabilities, the Seller shall retain, and the Buyer shall not be obligated to pay, perform or otherwise discharge, any other Liabilities of Seller, whether arising prior to, on or after the Closing Date, whether or not related to the Business and whether or not disclosed to the Buyer (“Retained Liabilities”).
See §2.2(b)(i)
The Salem agreement made the buyer responsible for fulfilling job listings and subscriptions sold before closing, listed on Schedule 1.3(a), including refunds to subscribers who cancel.
The Assumed Liabilities include the liability to fulfill contracts for all job listings and subscriptions to products and services on the Websites sold by Seller prior to the Closing Date, all of which liabilities are set forth on Schedule 1.3(a) (such liabilities, the “Fulfillment Liability”), including the liability to pay refunds to any subscribers who cancel (for whatever reason) their subscriptions to any of the Website’s products and services sold by Seller.
See §1.3(a)
The Luna agreement included a representation that no seller affiliate, other than as scheduled, has an interest in intellectual property used in or necessary for the business.
No Seller Affiliate (other than as identified on Schedule 3.25(a)) owns, directly or indirectly, or has any interest (including but not limited to license-based interests) in any Intellectual Property Asset or other Intellectual Property that relates to, is used or held for use in, or is necessary for the Business.
See §3.25
Samuel D. Hodson states that a seller’s creditors are not parties to, or bound by, the asset purchase agreement, noting that bankruptcy-court-ordered and other judicial sales may be an exception.
A seller’s creditors are not parties to the asset purchase agreement and are not bound by it. (Sales governed by bankruptcy court orders pursuant to 11 U.S.C. 363 and other judicial sales may be an exception to this rule.)
See Samuel D. Hodson, Successor Liability Risks in Asset Purchase Agreements, Taft Law Bulletins (June 26, 2020).
Which schedules do we need, and how specific should they be?
Commentary recommends making very clear which assets are included and which are excluded, and schedules can do that work, as in one filed agreement whose acquired assets include those set forth on a schedule and whose assumed liabilities are only those listed on another schedule. On a touch screen, a tap shows all 3 sources in this group. Another filed agreement lists every intellectual-property agreement by date, title and parties.
Beyond the perimeter, schedules record the facts of the particular transaction: one filed agreement qualifies the seller's representation that no notice or consent is needed for the sale by the consents listed on a schedule. An online publishing agreement lists on a schedule the permitted liens other than those to be released at or before closing, and lists on another schedule the subscriptions and job listings sold before closing that the buyer must fulfill. Handover steps can be scheduled too: one agreement requires the seller to give the buyer administrative-level access to the software and application items listed on a schedule, and an internet-services agreement set out its transition terms in a schedule, starting with a list of the user names and passwords to servers and software.
Essential assets are identified item by item: for an online business, the identifiers start with the websites, domain names and social-media accounts, which one filed agreement lists on a schedule together with the website content and software code it transfers. Accounts can be listed by institution and account number, as one agreement does for every bank account and the persons authorized to draw on it, and software can be listed product by product, while app identifiers and code repositories are covered in the app transfer and website migration questions. Replaceable items can be described by category: the same online publishing agreement transfers its office equipment, computers and inventory as a category that includes, but is not limited to, the items on a schedule.
Disclosure schedules have a separate job, and Tyler Conway and Tracy Belton identify two kinds of schedule information, lists and exceptions. Exception schedules record the seller's exceptions to its representations, such as a known dispute, an unassigned contractor contribution or a lien that will be paid at closing, and an exception properly scheduled is not a breach of the representation it qualifies. One filed agreement ties each exception to the representation it qualifies: its intellectual-property representations are each made except as set forth in a numbered part of its schedule.
Sources for this answer
The Luna agreement supports identifying IP agreements by date, title and parties in its disclosure schedule.
Schedule 3.25(b) contains a correct, current and complete list of all Intellectual Property Agreements, specifying for each the date, title and parties thereto.
See §3.25(b)
Tyler Conway and Tracy Belton identify two categories of disclosure-schedule information: lists and exceptions.
There are two categories of information presented in disclosure schedules: lists and exceptions.
See Tyler Conway and Tracy Belton, Tips on Drafting and Negotiating Disclosure Schedules, Arnold & Porter (Dec. 4, 2015).
Conor Meyers explains that a properly scheduled exception is not a breach of the representation.
A representation is made except as disclosed, so an exception properly scheduled is not a breach at all.
See Conor Meyers, Reps and Warranties in a Business Sale, Clark Meyers (Aug. 21, 2026).
Imke Ratschko supports clearly describing which assets are included and which are excluded.
So I recommend that the description makes it very clear which assets are included, and which are excluded.
See Imke Ratschko, The Basics of an Asset Purchase Agreement, Ratschko PLLC (July 25, 2022; updated July 28, 2022).
The Grove agreement's acquired assets include those listed on Schedule 2.1(a).
The Acquired Assets include, without limitation, those set forth on Schedule 2.1(a) hereto.
See §2.1(a)
The Grove agreement limited its assumed liabilities to the seller liabilities listed on Schedule 2.2(a).
“Assumed Liabilities” means only those Liabilities of Seller set forth on Schedule 2.2(a), which includes a list of the assumed accounts payable of Seller.
See §2.2(a)
The Luna agreement's representation that no notice or consent is needed for the transaction is qualified by the consents listed on Schedule 3.2(c).
Except as set forth in Schedule 3.2(c), Seller is not required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.
See §3.2(c)
The Salem agreement lists on Schedule 5.4 the permitted liens other than those to be released at or before closing.
To Seller’s knowledge, all Permitted Liens other than those that will be released at or before Closing are set forth on Schedule 5.4.
See §5.4
The Salem agreement lists on Schedule 1.3(a) the job listings and subscriptions sold before closing that the buyer must fulfill.
The Assumed Liabilities include the liability to fulfill contracts for all job listings and subscriptions to products and services on the Websites sold by Seller prior to the Closing Date, all of which liabilities are set forth on Schedule 1.3(a) (such liabilities, the “Fulfillment Liability”), including the liability to pay refunds to any subscribers who cancel (for whatever reason) their subscriptions to any of the Website’s products and services sold by Seller.
See §1.3(a)
The iGourmet agreement required the seller to give the buyer administrative-level access to the software and application items listed in its disclosure schedules.
Promptly following the execution of this Agreement, Seller shall provide Buyer with administrative level access to the software/application items listed on Section 5.01 of the Disclosure Schedules.
See §5.01
The Sitestar agreement set its transition terms in Schedule 2.4, beginning with the seller's list of user names and passwords to servers and software.
The Parties agree to the following transition related terms at Closing; 1. Seller agrees to provide Buyer with a list of all necessary user names and passwords to servers and software on or immediately after the Transfer Date.
See Schedule 2.4
The Salem agreement transfers the websites, internet domains and social-media accounts listed on Schedule 1.1(d), together with the website content and software code.
(d) Internet Domains, Social Media Accounts. All websites, Internet domains, social media accounts, and their related Uniform Resource Locators (“URLs”) used in the operation of the Business (“Websites”, “Domain Names” and “Social Media Accounts”, respectively) listed on Schedule 1.1(d); (e) Content and Software. All content on the Websites (including all rights and interests of Seller to content created by third parties which is not owned by Seller), including e-mail addresses of registered users, technology, and any master media files in Seller’s possession, as well as all functionality of the Websites, including content management systems, and software codes and enhancements, other than the Shared Code (defined in Section 8.9);
See §1.1(d)–(e)
The Bankrate agreement's Schedule 4.23 lists each of the seller's bank accounts by institution and number, with the persons authorized to draw on them.
Schedule 4.23 is a complete and correct list of each bank or financial institution in which Seller has an account, safe deposit box or lockbox, or maintains a banking, custodial, trading or similar relationship, the number of each such account or box, and the names of all persons authorized to draw thereon or to having signatory power or access thereto.
See §4.23
The Bankrate agreement's Schedule 4.10(c) lists each proprietary product or service of the seller, including its proprietary software.
Schedule 4.10(c) sets forth a true, correct and complete list of each proprietary product or service developed, licensed, manufactured, marketed or sold by Seller, including the Seller Proprietary Software.
See §4.10(c)
The Salem agreement transfers its office equipment, computers, inventory and other tangible personal property as a category that includes, but is not limited to, the items on Schedule 3.6.
(a) Tangible Personal Property. All office equipment, computers, monitors, servers, modems, desk, chairs, software, parts, supplies, furniture, furnishings, tools, fixtures, leasehold improvements, inventory, and other tangible personal property used in the conduct of the Business including but not limited to the items set forth on Schedule 3.6 (collectively, “Tangible Personal Property”); (b) Licenses and Permits. All rights associated with the “Licenses” (as that term is defined in Section 3.17) necessary to operate the Business as it is currently operated except for the Excluded Licenses;
See §1.1(a)–(b)
The Luna agreement made an intellectual-property representation except as set forth in Schedule 3.25(c).
Except as set forth in Schedule 3.25(c), none of the Intellectual Property Assets will be subject to any Encumbrance as a result of any written agreement or other facts or circumstances existing before the date hereof.
See §3.25(c)
What should the agreement say about who owns the code and content?
The agreement can include a representation that the seller owns the intellectual property being sold, as one filed asset purchase agreement did by representing sole and exclusive ownership of its intellectual-property assets, free and clear of encumbrances, while expressly not representing that those rights are enforceable.
The schedules show what the ownership representation covers and where the business depends on someone else's rights: the same agreement required a schedule listing all of its intellectual-property agreements, specifying each agreement's date, title and parties. It also represented that the seller had contracts with its current and former employees and with each contributing contractor under which the contractor acknowledged the seller's ownership, presently assigned any ownership interest and waived moral rights to the extent the law permits. A disclosure schedule can record exceptions to those representations, as the same agreement did by making one of its intellectual-property representations except as set forth in a numbered part of its schedule; where a contributor still owns U.S. copyright, the signed-writing rule is addressed under contributor-owned code.
Where the business depends on intellectual property the seller keeps, the agreement can grant an express post-closing use right: one filed asset purchase agreement kept code shared with the seller's other websites as an excluded asset that remained the seller's property after closing. It gave the buyer a royalty-free, perpetual, noncancellable worldwide license to use that shared code for the websites and the business.
Sources for this answer
The Luna agreement represented that the seller was the sole and exclusive legal and beneficial owner of its IP registrations and IP assets, free and clear of encumbrances, without representing their enforceability.
Seller is the sole and exclusive legal and beneficial owner of all right, title, and interest in and to the Intellectual Property Registrations and Intellectual Property Assets, free and clear of Encumbrances (it being understood and acknowledged that the foregoing representation and warranty does not constitute a representation and warranty of enforceability of any such Intellectual Property Registrations and Intellectual Property Assets).
See §3.25(c)
The Luna agreement supports identifying IP agreements by date, title and parties in its disclosure schedule.
Schedule 3.25(b) contains a correct, current and complete list of all Intellectual Property Agreements, specifying for each the date, title and parties thereto.
See §3.25(b)
The Luna agreement represented that the seller had contracts with current and former employees and with contributing contractors under which each contractor acknowledged the seller's ownership, presently assigned any ownership interest and waived moral rights to the extent permitted by law.
Seller (and its predecessor-in-interest) have entered into Contracts with each current and former employee in the form attached to Schedule 3.25(c) and has entered into Contracts with each current and former independent contractor who is or was involved in or has contributed to the invention, creation, or development of any Intellectual Property during the course of engagement with or for the benefit of Seller whereby such independent contractor (i) acknowledges Seller’s exclusive ownership of all Intellectual Property Assets invented, created or developed by such independent contractor within the scope of his or her engagement with such Seller; (ii) grants to such Seller a present, irrevocable assignment of any ownership interest such independent contractor may have in or to such Intellectual Property; and (iii) irrevocably waives any right or interest, including any moral rights, regarding such Intellectual Property, to the extent permitted by applicable Legal Requirement.
See §3.25(c)
The Salem agreement treated code shared with the seller's other websites as an excluded asset that remained the seller's property after closing.
Seller and Buyer acknowledge that there has been shared use of certain assets, including certain shared code, design and functionality of the Websites, and the software code, design, and functionality of other of Seller’s websites (the “Shared Code”), which is an Excluded Asset and which ownership shall remain with Seller following the Closing Date.
See §8.9
The Salem agreement gave the buyer a royalty-free, perpetual, noncancellable worldwide license to use the shared code for the websites and the business.
Buyer shall have the royalty-free, perpetual, noncancellable worldwide license to use the Shared Code with respect to the Websites and the Business.
See §8.9
The Luna agreement represents that, except as set forth in Schedule 3.25(c), none of the intellectual-property assets will be subject to an encumbrance arising from pre-signing agreements or circumstances.
Except as set forth in Schedule 3.25(c), none of the Intellectual Property Assets will be subject to any Encumbrance as a result of any written agreement or other facts or circumstances existing before the date hereof.
See §3.25
Can the customer data move with the business?
Privacy promises made to customers can constrain a transfer of their data: in the Facebook–WhatsApp acquisition, the FTC stated that WhatsApp must continue to honor its promises to consumers regardless of the acquisition.
For a business covered by California's consumer privacy law, transferring a consumer's personal information as an asset in a merger, acquisition or other transaction in which the recipient assumes control of all or part of the business is not a sale, provided that the information is used or shared consistently with that law. If the recipient later materially alters how it uses or shares that information in a manner materially inconsistent with the promises made at collection, it must give consumers prior notice of the new or changed practice.
The seller's privacy policy is the starting point, as a 2015 letter about a proposed bankruptcy sale of customer data shows, in which FTC consumer-protection staff read RadioShack's privacy policies as clearly and expressly representing that customer information would not be rented or sold to third parties. The letter warned that a sale of that information would contravene RadioShack's express promise not to sell or rent it and could be a deceptive or unfair practice under Section 5 of the FTC Act. The same letter described the Toysmart settlement, which allowed a transfer only if the buyer agreed not to sell the customer information as a standalone asset, was in the same line of business, agreed to treat the information under Toysmart's privacy policy and agreed to seek affirmative consent before changing that policy for information gathered under it.
A data schedule can identify each dataset and the copies the seller keeps, as in one filed asset purchase agreement that transferred the originals, or true and complete copies, of the customer records, customer lists and databases set forth on a schedule, while letting the seller keep a copy for internal recordkeeping and other legal and accounting purposes. The same agreement required the seller to cooperate in moving purchased files and content from the seller's servers to servers the buyer selected as soon as reasonably practicable after closing. A buyer that does not want the seller to keep a copy can require deletion, as one filed agreement for an online survey panel did by requiring the seller to permanently delete overlapping panel members within five days of closing and to certify the deletion in writing.
The RadioShack letter was a staff letter about one bankruptcy sale, and it stated that its views did not necessarily reflect those of the Commission or any individual Commissioner. Some categories of data carry their own federal rules: the Children's Online Privacy Protection Act, for example, makes it unlawful for an operator of a website or online service directed to children, or one with actual knowledge that it is collecting personal information from a child, to collect that information in a manner that violates the FTC's regulations.
Sources for this answer
The FTC statement supports continuing to honor the identified WhatsApp privacy promises despite the acquisition.
We want to make clear that, regardless of the acquisition, WhatsApp must continue to honor these promises to consumers.
See April 10, 2014, quoting the Bureau Director’s letter
Under the CCPA, a business does not sell personal information when it transfers it as an asset in a merger, acquisition, bankruptcy or other transaction in which the third party assumes control of all or part of the business, provided the information is used or shared consistently with the CCPA.
(C) The business transfers to a third party the personal information of a consumer as an asset that is part of a merger, acquisition, bankruptcy, or other transaction in which the third party assumes control of all or part of the business, provided that information is used or shared consistently with this title.
See Cal. Civ. Code § 1798.140(ad)(2)(C).
A third party that materially alters its use or sharing of transferred personal information in a manner materially inconsistent with the promises made at collection must give the consumer prior notice of the new or changed practice.
If a third party materially alters how it uses or shares the personal information of a consumer in a manner that is materially inconsistent with the promises made at the time of collection, it shall provide prior notice of the new or changed practice to the consumer.
See Cal. Civ. Code § 1798.140(ad)(2)(C).
FTC staff read RadioShack's privacy policies as clearly and expressly representing that customer information would not be rented or sold to third parties.
For the period covered by these privacy policies, RadioShack thus clearly and expressly represented that customer information would not be rented or sold to third parties.
See Letter from Jessica L. Rich, Director, FTC Bureau of Consumer Protection, to Elise Frejka, Consumer Privacy Ombudsman, In re RadioShack Corp., No. 15-10197 (Bankr. D. Del.) (May 16, 2015), at 3.
FTC staff described the Toysmart settlement, which allowed a transfer of customer information only if the buyer agreed not to sell it as a standalone asset, was in the same line of business, agreed to treat it under Toysmart's privacy policy and agreed to seek affirmative consent before changing that policy.
There, the Commission entered into a settlement with the company allowing the transfer of customer information under certain limited circumstances: 1) the buyer had to agree not to sell customer information as a standalone asset, but instead to sell it as part of a larger group of assets, including trademarks and online content; 2) the buyer had to be an entity that concentrated its business in the family commerce market, involving the areas of education, toys, learning, home and/or instruction (i.e., the same line of business that Toysmart had been in); 3) the buyer had to agree to treat the personal information in accordance with the terms of Toysmart’s privacy policy; and 4) the buyer had to agree to seek affirmative consent before making any changes to the policy that affected information gathered under the Toysmart policy.
See Letter from Jessica L. Rich, Director, FTC Bureau of Consumer Protection, to Elise Frejka, Consumer Privacy Ombudsman, In re RadioShack Corp., No. 15-10197 (Bankr. D. Del.) (May 16, 2015), at 5.
The Salem agreement transferred originals or true and complete copies of its customer records, lists and databases, while allowing the seller to keep a copy for internal recordkeeping and other legal and accounting purposes.
(g) Records. The originals (where available) or true and complete copies (if originals are not available) of all of the email subscriber/customer records, customer lists, customer contact information, registered user lists, databases, access codes, books, records, files, videos, logs and ledgers pertaining to the Sale Assets or used in the operation of the Business as set forth on Schedule 1.1(g) (collectively, “Records”); provided, that Seller may keep a copy of the Records for its internal recordkeeping and other legal and accounting purposes;
See §1.1(g)
The Salem agreement required the seller to cooperate in moving purchased files and content from the seller's servers to servers the buyer selected as soon as reasonably practicable after closing.
Seller will cooperate with Buyer to transfer title to all of Seller’s files and content purchased by Buyer and stored at Closing on Seller’s servers from those servers to servers selected by Buyer as soon as reasonably practicable following the Closing.
See §8.8
FTC staff stated concern that a sale of RadioShack's customer information would contravene its express promise not to sell or rent that information and could be a deceptive or unfair practice under Section 5 of the FTC Act.
We are concerned, however, that a sale or transfer of the personal information of RadioShack’s customers would contravene RadioShack’s express promise not to sell or rent such information and could constitute a deceptive or unfair practice under Section 5 of the FTC Act.
See Letter from Jessica L. Rich, Director, FTC Bureau of Consumer Protection, to Elise Frejka, Consumer Privacy Ombudsman, In re RadioShack Corp., No. 15-10197 (Bankr. D. Del.) (May 16, 2015), at 4.
The Greenfield Online agreement required the seller to stop emailing overlapping panel members at closing, permanently delete them from its other panel within five days of closing and have an officer certify that in writing.
Seller agrees that on the Closing Date it will stop sending, and will stop authorizing any other Person to send, any email messages via the YIO domain or otherwise to members of the YIO Panel that are also members of the Panel, and that within five days of the Closing Seller will permanently delete from the YIO panel all members that are also members of the Panel, and an officer of Seller shall so certify in writing to the Buyer.
See §5.5
The RadioShack letter states that its views do not necessarily reflect the views of the Commission or any individual Commissioner.
Please note that the views expressed herein do not necessarily reflect the views of the Federal Trade Commission or any individual Commissioner.
See Letter from Jessica L. Rich, Director, FTC Bureau of Consumer Protection, to Elise Frejka, Consumer Privacy Ombudsman, In re RadioShack Corp., No. 15-10197 (Bankr. D. Del.) (May 16, 2015), at 1 n.1.
COPPA makes it unlawful for an operator of a website or online service directed to children, or an operator with actual knowledge that it is collecting personal information from a child, to collect personal information from a child in a manner that violates the FTC's regulations.
It is unlawful for an operator of a website or online service directed to children, or any operator that has actual knowledge that it is collecting personal information from a child, to collect personal information from a child in a manner that violates the regulations prescribed under subsection (b).
See 15 U.S.C. § 6502(a)(1).
How does the buyer make sure the assets are free of liens?
Under the Uniform Commercial Code as Delaware enacts it, a lien can survive the sale of an asset, because a security interest generally continues in collateral after a sale unless the secured party authorized the sale free of it.
Margaret M. Salinas recommends ordering UCC, litigation and tax lien searches on the seller at the outset of every transaction, and making payoff of existing liens, with evidence of their release, a condition to closing. The UCC search runs in the seller's state of organization, because under Delaware's UCC the law of the jurisdiction where the debtor is located generally governs perfection and a registered organization organized under a state's law is located in that state. It runs against the seller's exact legal name, because a financing statement with a defective debtor name still counts if a search under the debtor's correct name, using the filing office's standard search logic, would disclose it. A single filing can reach the whole business, because a financing statement sufficiently indicates its collateral by stating that it covers all assets or all personal property.
Payoff letters tie each release to the closing payment: one filed agreement required payoff letters from each person holding a lien on the acquired assets, stating the secured amount that the seller would pay at closing, followed by filed UCC-3 termination statements after closing.
After payment, the release is completed with a termination statement: under Delaware's UCC, for collateral other than the consumer goods covered by a separate rule, a secured party must send or file a termination statement within 20 days after it receives the debtor's signed demand when one of the listed conditions is met, such as no secured obligation or commitment remaining. Except as otherwise provided in section 9-510, which governs whether a filed record is effective, the financing statement stops being effective once the termination statement is filed. Because the statutory 20-day duty runs from the debtor's signed demand, a payoff letter can instead commit the lender to file the termination on receipt of the payoff amount.
The seller's title representation addresses a lien the search missed: one filed agreement for an online publishing business represented that the seller had good, valid and marketable title to all of the sale assets, free and clear of any liens except permitted liens, and listed on a schedule the permitted liens other than those to be released at or before closing. Vehicles need a separate check: under Delaware's UCC, filing a financing statement is not necessary or effective to perfect a security interest in property subject to the certificate-of-title rules for motor vehicles, among other listed statutes. The legal due diligence guide places lien review within a wider liability review.
Sources for this answer
Under Delaware's UCC, a security interest generally continues in collateral after disposition unless the secured party authorized a disposition free of it.
Except as otherwise provided in this Article and in Section 2-403(2): (1) a security interest or agricultural lien continues in collateral notwithstanding sale, lease, license, exchange, or other disposition thereof unless the secured party authorized the disposition free of the security interest or agricultural lien; and (2) a security interest attaches to any identifiable proceeds of collateral.
See 6 Del. C. § 9-315(a).
For non-consumer collateral, a secured party must send or file a termination statement within 20 days after the debtor's signed demand once no secured obligation or commitment remains.
(c) Other collateral. — In cases not governed by subsection (a), within 20 days after a secured party receives a signed demand from a debtor, the secured party shall cause the secured party of record for a financing statement to send to the debtor a termination statement for the financing statement or file the termination statement in the filing office if: (1) except in the case of a financing statement covering accounts or chattel paper that has been sold or goods that are the subject of a consignment, there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value; (2) the financing statement covers accounts or chattel paper that has been sold but as to which the account debtor or other person obligated has discharged its obligation; (3) the financing statement covers goods that were the subject of a consignment to the debtor but are not in the debtor’s possession; or (4) the debtor did not authorize the filing of the initial financing statement.
See 6 Del. C. § 9-513(c).
Filing a termination statement makes the related financing statement ineffective.
(d) Effect of filing termination statement. — Except as otherwise provided in Section 9-510, upon the filing of a termination statement with the filing office, the financing statement to which the termination statement relates ceases to be effective.
See 6 Del. C. § 9-513(d).
Margaret M. Salinas recommends ordering UCC, litigation and tax lien searches on the seller at the outset of every transaction.
Uniform Commercial Code (UCC), litigation and tax lien searches should be ordered on the seller(s) at the onset of every transaction.
See Margaret M. Salinas, Five Issues to Address When Acquiring a Business, Chuhak & Tecson (Apr. 18, 2024).
Margaret M. Salinas recommends making payoff of existing liens and evidence of their release a condition precedent to closing.
If the seller(s) have existing liens, it should be a condition precedent to closing that those liens are paid off and evidence of the release of such liens is provided to the purchaser.
See Margaret M. Salinas, Five Issues to Address When Acquiring a Business, Chuhak & Tecson (Apr. 18, 2024).
Except as otherwise provided in the section, while a debtor is located in a jurisdiction, that jurisdiction’s law governs perfection and priority of a security interest in collateral.
(1) Except as otherwise provided in this section, while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.
See 6 Del. C. § 9-301(1).
A registered organization organized under a state’s law is located in that state.
(e) Location of registered organization organized under State law. — A registered organization that is organized under the law of a State is located in that State.
See 6 Del. C. § 9-307(e).
A debtor-name error does not make a financing statement seriously misleading if a search under the debtor’s correct name, using the filing office’s standard search logic, would disclose it.
(c) Financing statement not seriously misleading. — If a search of the records of the filing office under the debtor’s correct name, using the filing office’s standard search logic, if any, would disclose a financing statement that fails sufficiently to provide the name of the debtor in accordance with Section 9-503(a), the name provided does not make the financing statement seriously misleading.
See 6 Del. C. § 9-506(c).
A financing statement sufficiently indicates its collateral by a description under section 9-108 or by stating that it covers all assets or all personal property.
A financing statement sufficiently indicates the collateral that it covers if the financing statement provides: (1) a description of the collateral pursuant to Section 9-108; or (2) an indication that the financing statement covers all assets or all personal property.
See 6 Del. C. § 9-504.
The Grove agreement required payoff letters from each lienholder stating the secured amount, to be paid by the seller at closing, and filed UCC-3 termination statements after closing.
(xi) Payoff letters from each Person who has any Lien on or affecting any or all of the Acquired Assets, which letters shall state the outstanding amount of the obligation secured by the Lien (which amount shall be paid by Seller at Closing to such Person) and, after Closing, Seller shall provide copies of executed and filed UCC-3 termination statements and/or similar or other instruments evidencing the satisfaction of such indebtedness or other obligation in each jurisdiction where evidence of such obligation is necessary to perfect such satisfaction;
See §2.5(xi)
The Salem agreement represented that the seller had good, valid and marketable title to all of the sale assets, free and clear of any liens except permitted liens.
Seller has good, valid and marketable title to all of the Sale Assets, free and clear of any Liens except for Permitted Liens.
See §3.5(a)
The Salem agreement lists on Schedule 5.4, to the seller’s knowledge, the permitted liens other than those to be released at or before closing.
To Seller’s knowledge, all Permitted Liens other than those that will be released at or before Closing are set forth on Schedule 5.4.
See §5.4
Except as provided in subsection (d), filing a financing statement is not necessary or effective to perfect a security interest in property subject to listed federal law, Delaware’s motor-vehicle certificate-of-title lien provisions, or another jurisdiction’s certificate-of-title statute.
(a) Security interest subject to other law. — Except as otherwise provided in subsection (d), the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to: (1) a statute, regulation, or treaty of the United States whose requirements for a security interest’s obtaining priority over the rights of a lien creditor with respect to the property preempt Section 9-310(a); (2) Subchapter II of Chapter 23 of Title 21, relating to the notation of liens and encumbrances on certificates of title for motor vehicles; or (3) a statute of another jurisdiction which provides for a security interest to be indicated on a certificate of title as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the property.
See 6 Del. C. § 9-311(a).
What if a contractor or founder still owns part of the code?
A contractor or founder who still owns U.S. copyright in part of the business's code or content must sign the transfer, or have an authorized agent sign it, because 17 U.S.C. § 204(a) requires the rights owner's signed writing for a copyright ownership transfer outside operation of law.
Because the writing must be signed by the owner of the rights conveyed or that owner's authorized agent, a signature from the selling company alone does not establish a missing contributor assignment. Who owns the rights depends on who created the work and how: copyright vests initially in the author, and for a work made for hire the employer or other person for whom the work was prepared is considered the author and, absent a signed written agreement otherwise, owns all of the rights. Existing licenses also survive the files' arrival: a nonexclusive license evidenced by a writing signed by the rights owner prevails over a conflicting transfer of ownership if it was taken before the transfer was executed, or in good faith before the transfer was recorded and without notice of it.
The asset schedule identifies the relevant code, content and other works, and a separate copyright assignment can supply the conveyance, as in one filed agreement that called for an assignment of copyrights at closing alongside the assignment and bill of sale. When a contributor assignment is missing, the parties can make its delivery a closing condition or exclude the affected work with a price change; to accept the risk instead, the seller can give a specific representation, as one filed agreement did by representing that each contributing contractor had presently assigned any ownership interest to the seller. Third-party dependencies are addressed through the ownership representation and its schedules.
Sources for this answer
Section 204(a) requires a signed writing for a copyright ownership transfer other than by operation of law.
A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.
See 17 U.S.C. §204(a)
Section 201(a) vests copyright initially in the author or authors of the work.
Copyright in a work protected under this title vests initially in the author or authors of the work.
See 17 U.S.C. §201(a)
Section 201(b) treats the employer or other person for whom a work made for hire was prepared as its author and, absent a signed written agreement otherwise, as owner of all the rights.
In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.
See 17 U.S.C. §201(b)
Section 205(e) gives a signed written nonexclusive license priority over a conflicting transfer of ownership if taken before the transfer was executed, or in good faith before its recordation and without notice.
A nonexclusive license, whether recorded or not, prevails over a conflicting transfer of copyright ownership if the license is evidenced by a written instrument signed by the owner of the rights licensed or such owner's duly authorized agent, and if- (1) the license was taken before execution of the transfer; or (2) the license was taken in good faith before recordation of the transfer and without notice of it.
See 17 U.S.C. § 205(e)
The Greenfield agreement’s closing documents included an assignment and bill of sale, an assignment of trademarks, an assignment of copyrights and any other assignments needed to transfer the assets.
Such documents shall include, without limitation, an Assignment and Bill of Sale in the form attached hereto as Exhibit 2.5, an Assignment of Trademarks in the form attached hereto as Exhibit 2.5(a), an Assignment of Copyrights in the form attached hereto as Exhibit 2.5(b), and any assignments or other documents necessary to effect such transfer and conveyance of the Transferred Assets.
See §2.5
The Luna agreement represented that the seller had contracts with current and former employees and with contributing contractors under which each contractor acknowledged the seller's ownership, presently assigned any ownership interest and waived moral rights to the extent permitted by law.
Seller (and its predecessor-in-interest) have entered into Contracts with each current and former employee in the form attached to Schedule 3.25(c) and has entered into Contracts with each current and former independent contractor who is or was involved in or has contributed to the invention, creation, or development of any Intellectual Property during the course of engagement with or for the benefit of Seller whereby such independent contractor (i) acknowledges Seller’s exclusive ownership of all Intellectual Property Assets invented, created or developed by such independent contractor within the scope of his or her engagement with such Seller; (ii) grants to such Seller a present, irrevocable assignment of any ownership interest such independent contractor may have in or to such Intellectual Property; and (iii) irrevocably waives any right or interest, including any moral rights, regarding such Intellectual Property, to the extent permitted by applicable Legal Requirement.
See §3.25(c)
What should the agreement's security representations cover?
An agreement can address current safeguards and past security incidents in separate representations, as one filed asset purchase agreement did: one that the seller had implemented reasonable safeguards, and another, qualified by the seller's knowledge, about security incidents in the past five years involving third-party processors' systems or data. On a touch screen, a tap shows all 2 sources in this group.
A known incident belongs on the disclosure schedule as an exception, because a representation is made except as disclosed, so an exception properly scheduled is not a breach at all. The lookback period and any knowledge qualification are negotiated terms that the agreement states expressly, as that agreement's five-year period and knowledge qualifier show.
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The Salem agreement supports a seller assurance concerning the specified safeguards for business data and systems.
Seller has implemented reasonable and appropriate administrative, physical and technical safeguards to protect the privacy, security, confidentiality, availability, and integrity of all Business Data and Business Systems, in material compliance with all applicable Data Protection Requirements.
See §3.15(e)
The Salem agreement included a knowledge-qualified representation that there had been no security incident involving third-party processors during the past five years.
To Seller’s knowledge during the past five years there has been no Security Incident involving any Business System operated or controlled by any Third Party Processor or any Business Data under the custody or control of any Third Party Processor.
See §3.15(e)
Conor Meyers explains that a representation is made except as disclosed, so an exception properly scheduled is not a breach.
A representation is made except as disclosed, so an exception properly scheduled is not a breach at all.
See Conor Meyers, Reps and Warranties in a Business Sale, Clark Meyers (Aug. 21, 2026).