On 17th November 2017, PwC Legal Switzerland ("PwC") posted for sale an intra-group Asset Transfer Agreement on PartnerVine. This blog is a question and answer session about the intra-group Asset Transfer Agreement with Daniela Reinhardt, PwC Legal Switzerland's head of Company Law.
PartnerVine: PwC has recently posted an intra-group Asset Transfer Agreement on PartnerVine. PwC is already selling a Transfer of Promissory Note and a Share Transfer Agreement for intra-group transactions. When would you need one or the other of these transfer agreements?
Daniela: The intra-group transfer agreements are all intended to be used in reorganizations within a group of companies. From there, it depends on what you need. Here is an overview of the intra-group transfer agreements we've currently got on PartnerVine:
- Share Transfer Agreement. This agreement is applicable if you want to transfer shares to another company.
- Asset Transfer Agreement. This agreement is used to transfer assets of all kinds like contracts, employees, equipment or other assets. The consideration for the assets can be paid in cash or by taking over a debt of the transferring Company.
- Transfer of Promissory Note. This agreement is used to transfer an existing receivable in the form of a promissory note. In exchange for the promissory note, debts owed by the transferor to the transferee are reduced or extinguished.
When you put together the three transfer agreements, you have got three of the most commonly used transfer agreements for corporate reorganizations involving shares, assets and receivables. If you are thinking of which one to use, the place to start is to decide about the object of transfer. These three documents will cover most of the common issues.
PartnerVine: You mentioned that the Asset Transfer Agreement can cover employees. I can see how contracts and equipment can be considered assets of a company, but employees? Wouldn't employees be considered an expense?
Daniela: Employees themselves are often touted as the greatest asset of a company. In case of a transfer of employees, the respective contracts will be transferred. in this connection, it needs to be examined and clarified in particular whether a transfer of undertaking in the sense of the Swiss Code of Obligations is given. In such case, further obligations have to be observed.
Accounting-wise the deferrals regarding vacation and overtime balances will be transferred.
Even though human capital may not show up on the balance sheet for accounting purposes, we would use the Asset Transfer Agreement to transfer employees in a corporate reorganization.
PartnerVine: The agreement is called a 'short-form' template, why is that? What would a long-form template look like?
Daniela: It's called a short-form template because it contains the basic but required content of a transfer agreement. In our experience, the short-form template is sufficient for the majority of cases, but corporate reorganizations can get incredibly complex. Depending on the nature of the assets transferred, there may be other formalities required to formalise the transfer in certain jurisdictions, and it is not realistic to catch all possible situations by one template. We are not there yet in terms of automating all of our expertise - although we are working on it!
PartnerVine: Can you use this agreement if you have a cross-border restructuring?
Daniela: We have written the agreement in accordance with Swiss law, so we cannot speak to the laws of other jurisdictions for this document. If both parties had signed the agreement and the governing law clause remained as we drafted it, a Swiss court would apply Swiss law to resolve any disputes. That would also be the case if the parties were outside of Switzerland as long as there is any relation to Switzerland whatsoever.
PartnerVine: Is there anything you are particularly proud of in this agreement?
Daniela: We spoke before about creating a suite of documents that can cover a lot of corporate reorganizations. With the Asset Transfer Agreement, I really think we are getting there. In addition to the Share Transfer Agreement, Asset Transfer Agreement and Transfer of Promissory Note, we also have a really solid set of documents relating to the transfer of intellectual property. With these documents, we are covering a lot of use cases and I am proud of that.
Nothing in this blog may be relied on as legal advice. Please consult your own counsel for advice specific to your facts and circumstances.