There are many reasons why business owners choose to sell their business, whether triggered by financial hardship, business partnership disagreements, market changes or a desire for a change. Prior to engaging in negotiations and preparing a contract, there are numerous things business owners can do to assist in a smooth sale.
Some of the key things a Vendor needs to consider are:
- What tangible (physical) assets are being sold as part of the business (i.e. plant and equipment), identify those that will or will not form part of the sale and the condition and value of each;
- What intellectual property forms part of the sale (i.e. trade mark), what is the estimated value of this;Is there any work in progress? How will this be dealt with, who will finish it and how will any payments for this work be arranged?
- Whether the premises are leased or licenced. In this regard, you will need to take note of what the expiry date of this lease/licence is, whether there are any make good provisions. You will also need to factor in an extended time frame to allow for an assignment of the lease/licence or a new lease/licence to be negotiated by a purchaser and obtaining any landlord or licensor consent. It is also helpful to locate a copy of the lease or licence;
- If the business franchise? What requirements are there under this agreement? As with a lease, franchisor consent will need to be obtained. There also may be other critical disclosure documentation that needs to be prepared for the purchaser;
- Review employee contracts, arrangements and entitlements, in particular the payment of all statutory requirements (i.e. superannuation);
- Whether the business is currently involved in any legal action or the threat of legal action;
- Whether there are any licences, PPSR or loan agreements over any of the business assets and the nature of these;
- Do you intend to own a similar business in the future? Where would this be? These will need to be taken into account should there be any restraint of trade. Also consider who the ‘key persons’ of the business are;
- How is your confidential material protected? Ensure this is adequately protected when entering into negotiations with a prospective purchaser.
It is a common misunderstanding that a business can simply be handed over with a basic document signed by both parties. However, as the above list suggests, there are many aspects and complexities to a sale of business. It is therefore important to ensure that a solicitor is involved to protect your interests, prepare the required documents, review any documents, conduct searches and make sure that the agreement between both parties ensures that every aspect of the business is covered and properly assigned to the new owner and that the vendor can walk away knowing any loose ends have been tied off.
At Adams & Partners Lawyers we understand that every business sale is different and have experience acting for both purchasers and vendors. If you are considering selling your business or purchasing a business, we can help you!
Written by Amelia Hatton – October 2019