Asset Purchase
A transaction structure in which the buyer acquires specified assets (and typically assumes specified liabilities) of a target business, rather than acquiring the target's equity. The selling entity continues to exist after closing, holding unsold assets, retained liabilities, and the purchase price.
An asset purchase is a transaction structure in which the buyer acquires specified assets (and typically assumes specified liabilities) of a target business, rather than acquiring the target's equity. The selling entity continues to exist after closing, holding the unsold assets, retained liabilities, and the purchase price.
Scope of "all or substantially all"
Texas requires shareholder approval for a sale of "all or substantially all" of a corporation's property and assets outside the ordinary course of business. § 21.451. The phrase is not statutorily defined for LLCs and is interpreted on a fact-intensive basis for corporations, the leading consideration is whether the sale would substantially defeat the purpose for which the corporation exists.
The Texas successor-liability statute (§ 10.254)
A disposition of property by a Texas domestic entity is not a merger for any purpose, and the acquiring entity may not be held responsible or liable for any liability of the transferring entity that is not expressly assumed in the purchase agreement, except as otherwise provided by other applicable statutes. § 10.254(b). This statute is the principal reason buyers prefer asset purchases over stock purchases for Texas targets, combined with careful contractual drafting, it provides substantial protection against successor liability.
Limits on § 10.254 protection
Despite § 10.254, Texas courts have recognized common-law successor-liability exceptions in certain circumstances: (1) express or implied assumption of liabilities; (2) de facto merger (rejected by § 10.254 as a matter of state corporate law, but recognized in some federal contexts and product-liability cases); (3) mere continuation; and (4) fraudulent transfer to escape liability. Tex. Tax Code § 111.020 imposes statutory successor liability for unpaid sales and use taxes, requiring the buyer to withhold from purchase price or obtain a Comptroller's certificate of no tax due.
Asset purchases are the dominant Texas M&A structure for sales of operating businesses where the buyer is paying primarily for operating assets and goodwill, and where the seller has tax loss carryforwards or contingent liabilities the buyer wishes to leave behind. The trade-off: contracts, licenses, and permits typically require third-party consents to assign, adding closing complexity that stock purchases avoid.
Companion article: Selling Your Business in Texas