Do You Need A Solicitor When Selling Your Business?
When you are ready to sell your business there are many legal issues to consider which is best done with the assistance of a solicitor experienced in business transactions. This will help ensure that you avoid the many pitfalls that may be encountered along the way. Once the purchaser has completed any due diligence whereby it obtains all the information it needs with regard to your business, a Contract for Sale of Business will need to be prepared which is something that only an experienced solicitor is normally qualified to do. The first thing a solicitor will do is to investigate the party that is buying your business. If it is a company, as opposed to a natural person, he will check that the company is registered. If so, he will then ensure that the directors of that company enter into a Deed of Guarantee guaranteeing that the company performs its obligations under the Contract. Otherwise the company might be able to walk away from the Contract having little capital leaving you “holding the bag”. Another major issue is the Lease over the premises on which the business is conducted. You and the purchaser have to decide whether you wish there to be a transfer of the Lease or whether the purchaser wishes to apply to the lessor (the owner of the premises) to negotiate a fresh Lease. In either case, the Contract has to be made subject to this occurring. If there is to be a transfer of the Lease is up to your solicitor to apply to the lessor’s solicitor for the consent of the lessor. The lessor’s solicitor will then prepare a Deed of Consent to Transfer of Lease between the lessor, you as lessee and the purchaser as the incoming lessee. This Deed will often require intense negotiation to ensure that it is in your best interests particularly if you want to be released from liability under the Lease once the purchaser takes over. Otherwise you could be made liable for any breach of Lease by the purchaser after you have left the business. A further issue of concern to you as a vendor is to ensure that any restraints on you that the purchaser seeks with regard to your trading in a similar business, once your business is sold, over a certain geographical area and over a certain time period are reasonable as these restraints will always appear in the Contract. An experienced solicitor can assist you in deciding what reasonable restraints should apply. There are many other legal matters that a solicitor can help you with or arrange including:
(a) the transfer of the business name;
(b) whether the business is to be sold as a going concern so as to avoid the payment of GST;
(c) whether the purchaser wishes you to remain in the business as a contractor in which case a suitable agreement will need to be prepared and included in the Contract;
(d) answering any Requisitions on Title (formal requests for information concerning the business) the purchaser’s solicitor may have; (e) organizing an exchange of Contracts at which the purchaser will pay a 10% deposit; and
(f) organizing a settlement at which the purchaser will pay the balance of the purchase moneys due under the Contract.