Buying A Business
Buying a business is a complex process and you will need to be very familiar with all the steps required in order to carry them out successfully.
You may not be aware of all the searches and enquiries you need to carry out to determine whether there are any issues that could affect your purchase.
An experienced business lawyer can guide you through the process of purchasing a business and alert you to any warning signs along the way.
What is involved with purchasing a business?
Purchasing a business can involve a lot of back and forth negotiations between you and the sellers. You will need to be aware of what legal documents you must provide to the sellers and at what stage in the transactions you need to provide them.
What are the various stages of purchasing a business?
The main legal milestones in the business purchase process are the negotiation stage, contracts stage (often called exchange), pre-completion and completion (often called settlement).
During the negotiation stage you need to satisfy yourself that this is the business you wish to buy and how much you intend to pay for it. The, once the contract for the sale of business is agreed you and the seller will both sign and then exchange originals. If a deposit is payable you will usually need to pay this within a few days after contracts are signed. Then any conditions need to be addressed and the parties should work towards satisfying them before completion (e.g you may need to obtain finance, conduct due diligence or negotiate an assignment of the lease with the landlord).
After any conditions have been satisfied, the sale of business will have to be completed. It is at this stage that the sale is finalised and ownership of the business will be officially transferred to you. During the completion process, you will provide cheques to the seller for the purchase price and any adjustments such as your share for the rent of the business premises may also need to be paid.
What will a business lawyer do for me?
When you purchase a business, you could be purchasing a variety of assets including the business name, equipment, stock in trade, client databases and contact numbers. A business lawyer will be able to clearly identify what you are purchasing when you purchase a business. This is important because you may assume that when purchasing a business you will automatically gain ownership of the business’s website or contact numbers. This is not the case.
A business lawyer will also ensure that during the stages of exchange and completion, all of your concerns are addressed and that you are not paying for any outstanding matters that you are not responsible for.
Legal considerations when selling your business
There are a great many things to consider when selling a business and some of the main things which need to be considered have been set out below. To ensure that the sale of business agreement reflects all the terms that have been agreed, this should be prepared/reviewed by an experienced business lawyer.
Consider carefully what you are disclosing to prospective buyers
The buyer needs to be provided with enough information to enable it to make an informed decision as to whether to purchase your business or not, and determine the price it wants to pay, but not enough to enable it to set up a competing business! For that reason, any information disclosed to the buyer should be done so following execution of a carefully drafted non-disclosure agreement by the buyer. It is usual to provide information about business liabilities, the employees and their entitlements, the current lease(s) and any licenses required to operate the business, etc. There are instances where a seller can be held responsible for liabilities that were not disclosed when the buyer purchased the business, and for providing inaccurate information so, if you are uncertain as to what you should be disclosing, you should always seek appropriate advice.
Check your Lease
Do you lease your business premises? If so, you will need to check the terms of your lease to ensure that you have ability to assign the lease to the new buyer. Leases generally have terms which require you to obtain the landlord’s consent before you assign the lease to another party. The premises may be of substantial value to the buyer and, if you are unable to transfer your lease, you may not be able to sell your business. If you are unsure of your ability to assign, it would be worthwhile having your lease reviewed by a business lawyer.
Be clear exactly what is being sold
The agreement should make clear exactly what you are selling, which may include any or all of the plant and equipment, business assets, business records and intellectual property, etc. As the seller, it is your responsibility to set out for the buyer a list of exactly what it is that you are selling.
Selling a business can be an extremely tricky and risky process and, depending on the nature of the business, there may be certain factors which need to be taken into account in the sale of your business. An experienced business lawyer will be able to prepare your sale agreement, answer your questions and assist you through the entire sale process.
This is just a snap shot of some of the things you should think about when selling your business. For further information or for your FREE SELLER’S CHECKLIST please contact Helen Kay at Rise legal.
Please note: “This publication is for information purposes only and does not constitute legal advice. If you have any questions about this or any other commercial legal issue, please contact Helen Kay at Rise Legal.”