Plain Sailing?
When selling your business, sorting out the legal issues is essential to ensure things go smoothly. Although each sale is different, the process generally breaks down into 5 key stages:-
Pre-Sale
a) Get together all legal documents relating to your business, and plug any gaps! Some specific issues you might want to consider include:
• Employees – has everyone got a contract of employment?
• Plant and Equipment – is it properly maintained and have you got the records to prove it?
• Vehicles – do you have all service histories, log books and MOT certificates?
• Accounts – do you have the last 3 years accounts and up to date management accounts?
• Paperwork – do you have the originals of all important documents such as leases, hire agreements, contracts with customers and suppliers etc.?
• Licences – do you have what you need e.g. to sell alcohol or waste disposal?
b) Get the buyer to sign a Confidentiality Agreement before revealing information and starting negotiations.
Heads of Agreement
Be clear about what is/isn’t included in the sale, the price, when payment should be made and any pre-conditions, and restrictions to future trading.
Due Diligence by the Buyer
a) Financial Due Diligence looks at the financial viability of the business.
b) Legal Due Diligence involves checking all legal contracts, leases, titles, possible litigation and other issues, e.g. environmental risk. Good pre-sale preparation pays dividends: if the buyer perceives a risk they may pull out or seek to re-negotiate.
The Share or Asset Purchase Contract
This is the main legal document based upon the Heads of Terms and due diligence, and will contain the mechanics for completion, how the money will be worked out including how under/over-payments to third parties will be handled.
Warranties/Indemnities/Disclosure
Warranties and indemnities are legally enforceable promises by you to back up the information you have provided in the due diligence. A disclosure letter is one way to protect yourself so your buyer cannot say they didn’t know about
something.
Call David today on 0116 212 1000 to see how we can help if you’re selling a business.
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