Selling your company does not automatically transfer every contract to the buyer. Some agreements can continue under the new owner, while others may require consent, remain with you or need replacement. The outcome depends on the structure of the sale and the terms of each agreement. Here is what you can expect.
Some contracts transfer to the buyer
Some agreements can transfer as part of the sale, allowing the buyer to take over the business relationship and related obligations. For example, an asset sale may include contracts that support the business’s day-to-day operations. If you sell your company’s ownership interests instead, the company generally remains the contracting party, although other provisions can still affect the agreement.
Some contracts require consent before transfer
Certain agreements require the other party’s approval before you can transfer them to the buyer. For example, a contract might say that you cannot assign your rights or obligations without the other party’s prior written consent. Under New York law, clear language can make an attempted transfer ineffective without that consent.
This means you cannot assume that a contract will simply follow the business to its new owner. You may need to obtain approval from customers, vendors, landlords or other parties before closing. Checking these provisions early can help you identify agreements that could affect the sale.
Some contracts remain with you
Some agreements may stay with you rather than pass to the buyer. For example, you might have a loan agreement or a contract tied to an obligation that you agreed to retain as part of the sale. The purchase agreement can exclude those obligations from the transaction, leaving you responsible for them after closing.
Some contracts may need to be replaced
When you cannot transfer an agreement, you may need a new contract between the buyer and the other party. For example, if a key vendor’s agreement prohibits assignment without consent and they decline to approve the transfer, the buyer may need to negotiate a new contract. The same situation could arise with a customer whose contract cannot transfer to the new owner.
Know what happens before the sale closes
Before closing, review the agreements that support your business and determine which ones will transfer, require consent, remain with you or need replacement. Discussing these terms with your attorney can help you address potential problems as part of the sale rather than discovering them after the transaction closes.
