Selling your business - Part 3

April 14, 2011 - PRLog -- “There are many factors to consider when selling a business and the process can take several months. Ultimately you will want to achieve the best price possible for your business and an experienced commercial lawyer can help you achieve that,” Jeremy says.

Once you’ve agreed the first six steps (1) disposal of the shares or assets, (2) drafted your confidentiality agreement, (3) agreed your exclusivity agreement, (4) heads of terms, (5) due diligence and (6) approvals and consents, Jeremy now outlines the next three important steps that you should consult your solicitor over during the sales process: the sales and purchase agreement and what conditions you should be wary of, what warranties and liabilities you may be asked to accept and why the disclosure letter is a vital document when selling a business.

1.       Traditionally the buyer’s solicitor will draft the first version of the sale and purchase agreement and you can expect it to be weighed heavily in their favour.

Jeremy says,

“At this stage it is up to your solicitor to redress the balance and make the required amendments which will protect your interests. Without a solicitor’s advice and guidance, it’s very possible you could inadvertently agree to unfavourable conditions, such as allowing the buyer to pull out, without penalty, at the 11th hour.”

The purchase agreement also needs to incorporate a significant amount of additional information, such as:

Staff – employee lists, employment contracts, dismissed employees, employment claims and staff changes, etc.

Property – full disclosure must be made for the lease and landlord, etc.

Finance – details of turnover and costs of sales, a full debtor and creditor list, VAT returns,

PAYE details, etc.

Jeremy continues,

“This document represents the outcome of the key commercial and pricing negotiations for the business sale. It is vital that an experienced lawyer is involved to protect your interests.”

2.        The sales and purchase agreement will also include a list of warranties and indemnities that you have agreed to, prior to the sale completion.

Jeremy explains,

“A warranty is a statement of fact or written guarantee that you make to the buyer, for example, you may warrant that the business is not involved in any litigation, but if there actually is a dispute then the buyer can request compensation from you to cover any legal costs.

“A indemnity is a promise to pay money or a clause to allow the buyer to recover compensation in the event of any loss. For example an indemnity might be required by the buyer to cover future liabilities of the business but your solicitor should seek to put a limit on any claims such as this.”

3.        The disclosure letter is a very important document as it qualifies any warranties given in the sales and purchase agreement. For example you must disclose if there are any assets which are subject to a lease or hire agreement.

Jeremy notes,

“In simple terms the disclosure letter protects the buyer by ensuring that general and specific items have been declared or disclosed for the sale to proceed. If you don’t make adequate disclosures then you could leave yourself open to additional financial claims for breach of warranties.

“An experienced solicitor can draft a disclosure letter which can prevent future warranty claims in all but the most unforeseen of circumstances.”

In the next article, Alistair Millar, a solicitor at Tallents in Southwell, will explain the post-sale restrictions and how your solicitor can protect you from being sued after the business sale has completed.

Tallents has a range of experienced commercial lawyers who can advise you if you want to sell, or buy, a business.

For more information, contact Tallents on 01636 671881


Tallents Solicitors, 3 Middlegate, Newark
www.tallents.co.uk


ABOUT TALLENTS

Established in 1774 and with offices in Newark, Mansfield and Southwell, Tallents Solicitors services the legal needs of private individuals, company and commercial clients and farmers in North Nottinghamshire and Lincolnshire.

We still offer a personal service to our clients and our size and structure ensures that partners are never remote from our clients. We provide a full range of legal services and our expertise covers all areas of law including:

Agricultural law, criminal law, commercial and domestic property transactions, inheritance tax planning, trust and estate administration, wills and probate, commercial and general litigation, employment law, company and commercial law, intellectual property, matrimonial and family law, personal injury claims and children issues.

In 2009, Tallents celebrated 235 years, having served more than nine generations of North Nottinghamshire and Lincolnshire people. This makes Tallents one of the oldest law firms in the county and possibly the UK.



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