Understanding the Contract for the Sale of a Business
Once the owner of a business (the vendor) and the buyer (the purchaser) agree on the sale, the details must be set out in a written agreement called a Contract for the Sale of Business.
Usually, the vendor’s solicitor prepares the Contract and submits it to the purchaser’s solicitor. To save time and money, it is important that both parties agree on as many details as possible before instructing their legal representatives.
Key Matters to Resolve Early
The parties should resolve the following matters as early as possible:
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The names and details of the parties involved in the transaction
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The sale price
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The apportionment of the sale price between goodwill and equipment
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The terms of the restraint preventing the vendor from competing against the purchaser for a specified time and area
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The inventory of equipment
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The trial period the purchaser is allowed before settlement and the training period after settlement
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Whether the business is sold as a going concern to avoid GST payment
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Whether the purchaser will receive a transfer of the existing lease or a new lease from the lessor
Once the purchaser’s solicitor receives the Contract, they will provide legal advice to the purchaser. This may lead to further amendments and negotiations between the parties.
Signing and Exchanging Contracts
When the Contract is finalised, each party signs a counterpart Contract. The solicitors then exchange Contracts, and the purchaser pays the 10% deposit. From this moment, both parties become legally bound to proceed with the transaction.
Need Help With Your Business Sale Contract?
If you’re buying or selling a business, it’s crucial to get your Contract right. Contact A. S. Laumberg today for expert legal advice to ensure a smooth and secure transaction.