Selling Your Amazon Business? Not So Fast!

Jeff Craven

The 1970s rock band The Eagles had a verse in their hit Hotel California: “You can check-out anytime you’d like, but you can never leave.”

While Amazon sellers do not face quite the same predicament envisioned by the Eagles, you may feel a bit like you’re trapped in your own “Hotel California” because selling your Amazon business is not a simple process.

Your Amazon Services Business Solutions Agreement (“Agreement”) mandates that “You may not assign this Agreement, by operation of law or otherwise, without our prior consent.” Amazon is well known for not granting consent, at least not with any sense of urgency. You are, however, permitted to assign your rights and responsibilities under the agreement to an Affiliate, (any other entity that is under common control with the Amazon Seller) so long as you remain liable for obligations that arise prior to the assignment.

But if your proposed buyer is not an Affiliate – and they rarely are – you could conclude that the Agreement leaves you without control of your destiny. Not so.

The Agreement is governed by the laws of the State of Washington, where Amazon has its corporate headquarters. Under Washington State law, in the sale of a company via a Stock Purchase Agreement, (“SPA”) you would be selling the stock or membership units of your company that is the seller on Amazon – not the individual assets of your Amazon seller company. So, there is no need to assign the Agreement at all and thus there is no need for Amazon approval to close the deal, because you are just selling your company and everything (including the Agreement) that goes with your company.

This means that, in many cases a seller may use the SPA structure to sell the entire Company, including the Agreement and all other contracts held by the Company, without seeking the consent of Amazon (and without violating the Agreement).

To make it even more fun (and confusing) it might be that your buyer really doesn’t want to do a straight stock purchase because they don’t want all the liabilities associated with the company you’ve been operating for years to build-up and prepare for sale. No problem, first we form a new company (“Newco”) that you own, transfer the assets (but not the liabilities) of your long-standing company to Newco and assign the Agreement to Newco. Remember, this is allowed because Newco is owned by you and therefore is an Affiliate under the Agreement. Once this step is complete, we sell the stock of Newco to the buyer, through a SPA, and everyone gets what they want.

Note that an Asset Purchase Agreement (often preferred by buyers) is still possible, it just requires more steps and more time and, technically, Amazon’s consent. Even with these limitations, an Asset Purchase can be accomplished with some careful planning.

There are also ways to affect the assignment of the Company’s operating account at Amazon (which may only be modified via the requirements set forth in the Agreement) and simply advising Amazon that there is a new Administrator for the account. You simply send that notice to Amazon at the same time as you update your bank information, making sure to provide the bank with the appropriate corporate minutes and related documents they will require to meet their Patriot Act, “Know Your Customer” obligations.

So, Amazon sellers, don’t conclude that Amazon has you trapped in the equivalent of the Hotel California: check-out, if you wish, but be sure you are structuring your transaction properly.

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