Welcome to the fourth and final part on this series of articles discussing everything (legal!) you need to know about selling your business.

So far, we’ve covered:

That brings us nicely on to part 4. In this blog episode, I’ll be concentrating on documents and other matters. 

Aside from the usually document-heavy due diligence process, there will also need to be a suite of other documents to deal with the legal aspect of transferring a business from one party/ies to another.  These broadly include:

  1. Heads of Terms.
  2. The sale and purchase contract – a detailed document setting out not only warranties, asset lists, price and payment mechanisms, but also covering confidentiality, tax matters, restrictive covenants and a host of other important areas to ensure a smooth transaction.
  3. Consultancy Agreements – if seller(s) stay on for a short period to assist with a handover post-completion.
  4. Board minutes, resolutions, Companies House forms, for both buyer and seller if the buyer is itself a limited company.
  5. Resignations, no-claims deeds, settlement agreements for outgoing key employees/the individual sellers.

Other considerations:

Included in the process but also requiring their own specific advice and attention are matters such as:

  1. If the business has a lease, the landlord will need to be involved.  There may be extensive negotiations on matters such as dilapidations or rent reviews.  If the business owns a freehold property, this will be a key asset and a whole set of conveyancing due diligence may well be required, particularly if a third party funder requires the property as a secured asset.  Does the seller want to keep the freehold property?  In which case a capital de-merger may be required.
  2. Employees – current contracts and processes and procedures, past conduct of the business and its employees are all important matters to consider. The buyer may also want to bring in new employment contracts or pay and bonus structures post-completion.  TUPE considerations may also apply.
  3. Intellectual Property – does the business own this? If not, who does?  Does it use someone else’s IP?  In terms of name and branding these can be key.  If the position has been informal to date, it will likely need to be put in good order legally before a sale can complete.
  4. Tax – advice on tax warranties, risks, review of the company’s tax position and conduct of its tax affairs will be important again, to ensure no hidden surprises appear post-completion for either buyer or seller.

Competent, practical advisers will cover all of these areas, ensuring a good balance of legal advice and what will actually be workable in practice.  Again, they will advise on the risk profile of certain aspects of the business so that a buyer can purchase in an informed manner.  Their advice will mean as a seller you will be well informed as to whether or not a buyer’s demands are unreasonable.

A business sale is very much a team effort and a good ‘fit’ between seller (or buyer) and their legal adviser is essential.  If you would like to have an initial discussion about the sale of your business, contact me at karen.blakesley@cognitivelaw.co.uk

If you would like to have an initial discussion about the sale of your business, contact me at karen.blakesley@cognitivelaw.co.uk

Karen Blakesley

business purchase business sale buying a business selling a business