SELLING A BUSINESS

Generally, the earlier and more thoroughly you prepare the better. At Birch Law we can help with:

• The deal structure.
• Due diligence.
• Heads of terms.
• Warranties and the disclosure letter.
• The purchase agreement and other associated documentation.
• Post completion restrictions and obligations.

Before you start it is important to understand how you are going to structure the deal – are you selling the shares in the business or just the assets? It is vital that you consider the structure of the deal as early as possible as this will have an impact upon how the deal proceeds and possible tax liabilities on completion.

At Birch Law we can advise on the best structure for you and your business. We will consider the nature of the transaction with you and work closely with your tax advisor and accountant to ensure that you are fully aware of your options, and we can agree the best solution for you.

The due diligence stage is integral to any business sale. The buyer will want full disclosure of all relevant information (such as financial, business, intellectual property, employees, and any disputes). We can assist the seller with the due diligence stage, including the preparation of suitable non-disclosure agreements and compiling copies of the relevant documentation to be disclosed to the buyer.

Once the parties have agreed terms in principle it is important to record these in a set of heads of terms. This is a simple document that records the main terms of the agreement and forms the basis of the other transactional documents such as the sales agreement.

As part of the sales process the buyer will want to rely on certain warranties to ensure that the seller has not misrepresented the value of the business. The buyer will want to ensure that these are as comprehensive as possible. The seller on the other hand will want to limit these as much as possible. It is a balancing exercise between the wants of the buyer and interests of the seller.

When negotiating the terms of the agreement the seller will be afforded the opportunity to provide disclosure of key information that would otherwise put in breach of any warranties. This will normally take the form of a disclosure letter (which would often be accompanied with a bundle of supporting documents). The seller should ensure that everything that is relevant is disclosed in as much detail as possible before completion. Failure to disclose material facts prior to completion may result in the buyer bringing a claim against the seller for breach of warranty. By providing full disclosure the seller will be afforded certain protection against such claims.

The sale agreement records the terms of the agreement. It is a formal document recording both parties’ respective obligations. It records how the deal is to proceed, sums to be paid on completion, what is being purchased, the extent of any warranties, and post completion matters. It is a complex document, and it is therefore advisable that you obtain expert assistance at the very outset. At Birch Law we can review and/or draft the terms of the agreement, explain what the agreement means, deal with any negotiation and advise on any future liabilities and/or concerns. In addition to the sale agreement, we can assist with the preparation of associated documentation such as board minutes, share transfer forms and board resolutions.