Selling a business – What you need to know, part 2

Sept. 17, 2010 - PRLog -- “Even if you’re selling to a family member it is important to recognise that this is a complicated business transaction and sellers should take every measure to protect themselves from potential future liabilities,” Alistair says.

Once you’ve agreed the first three steps (1) disposal of the shares or assets, (2) drafted your confidentiality agreement and (3) agreed your exclusivity agreement, Alistair now outlines the next three important steps that you should consult your solicitor over during the sales process.

1.       Once the main terms for selling the business have been settled, it is usual for these to be set out in writing. This is called ‘Heads of Terms’.

Alistair says,
“At this stage it is vital that you get your solicitor to review the Heads of Terms at the outset before you sign anything as once the ink is dry, it can be very difficult to renegotiate revised terms at a later date.”

Although Heads of Terms are not usually legally binding it is possible to make them into a legal contract and sellers should be wary of signing without legal advice.

Alistair continues,
“You may think at this point that you still have time to negotiate the finer details of the sale, but if the Heads of Terms are legally binding, then the buyer might be able to force you to sell the business, even if the later negotiations break down and you decide not to proceed with the sale. This is why legal advice is vital during the sale of a business.”

2.        Once the Heads of Terms are signed, the buyer will begin the process of ‘due diligence’ and begin gathering all the detailed information they will need about your business. Attention to detail is paramount at this stage.  

Alistair comments,
“The seller may make the mistake of thinking that a piece of information is inconsequential and not check properly before providing it to the buyer. However, this small oversight could result in the seller being sued by the buyer for ‘non disclosure’ or ‘mis-representation’ post-completion.

“If the buyer can prove they have incurred losses as a result of the mis-information then the seller might be asked to pay back part of the sale price as recompense.”

3.        There may be several approvals or consents that have to be sought from third parties prior to the sale completing.

Alistair notes,
“At an early stage your solicitor should check to see which third parties need to be approached and whether their approval or consent needs to be given for the sale to proceed.

“For example, if there is a building lease the consent of the landlord will have to be assigned to the buyer. Without this consent, the seller, and not the buyer, might be wholly responsible for the remainder of the lease, having to pay rent and repair the building after the business has been sold.”

In the next article in September, Jeremy Blatherwick, a solicitor at Tallents in Newark, will explain the 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. 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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