LEGAL SERVICES - COMMERCIAL LAW

Buying a business

STEP 1 - Essential Advice for Buyers

You should seek your Accountant's advice as to whether or not proposed purchase is a good investment. We can recommend an Accountant to investigate the business if you do not have one.

STEP 2 - Checking the Contract

We will explain the contract to you and check it for a number of things such as:-

Precisely what the Vendor is selling you.

That any special conditions in the contract are not harsh or unfair.

That the terms specified are in accordance with your understanding of the agreement.

That the time required for completion will be for you to organise finance and familiarise with the business and its customers.

STEP 3 - Finance

is absolutely essential before you enter into a commercial to purchase a business that you not only have arranged have available the funds necessary to enable you to complete the purchase but also sufficient funds so that you can run the until the positive cash flow starts.

STEP 4 - Exchange of Contracts

you have not already done so, the deposit must be paid, usually to the agent. Once this step is taken both you and the Vendor are to the contract. We will then take all the steps needed enable completion to take place in accordance with the agreement. This often involves us in investigating various aspects of the sale and in liaising with various other persons such as landlords, agents, valuers and stocktakers to ensure that the mechanical processes set out in the contract can take place in an efficient and timely way to enable completion to take place as required.

STEP 5 - Procedure After Exchange of Contracts

The contract sets out the procedure which needs to be followed to enable the contract to be completed. Some common issues which to be addressed are as follows:

The Lease - You will either have negotiated a fresh lease with the landlord or alternatively the lease needs to be transferred. Either way it means involving the landlord and his solicitor, possibly also the agent. In our experience this process can delay completion and must be attended to and followed up diligently.

Licences and Permits - Sometimes businesses are conducted with licences or permits which need to be transferred to purchasers. The best example of this is the Lotto and other such licences conducted by newsagents. It is essential that any consents that are needed to the transfer of such licences are obtained promptly.

Lease and Hire Purchase Goods - Often motor vehicles, illuminated signs and office equipment are the subject of time payment agreements. Although the lender will usually consent to transfers it is another administrative problem which needs to be dealt with diligently to avoid delays.

Checking Vendor's Debts - We check as far as we can to see whether or not there are any monies owed on the plant or equipment. If the vendor is a trader then we check to see whether a bill of sale has been recorded against those goods at the Registrar General's. If the vendor is a company, a search against the company's register to see whether any charges are recorded there is appropriate. A check will be undertaken in respect of any motor vehicles the subject of the agreement.

STEP 6 - Time of the Essence

Timing in commercial transactions, and an agreement to purchase a business is certainly that, is regarded by the law as being an extremely important factor. Consequently if an agreement is required to be completed on a set date then woe betide any purchaser who is unable to complete on that day. You may be lucky enough to be given a day of grace but that would be all.

STEP 7 - Stamp Duty

All agreements for the purchase of a business attract stamp duty at a rate which is calculated on the value of the price paid with some exceptions for fixtures. In years gone by purchasers often neglected, or simply refused to pay, stamp duty on these transactions but we are legally and ethically obliged to ensure that stamp duty is paid.

STEP 8 - Trial in Business

The standard form of agreement for sale and purchase of a business provides for a purchaser's trial in the business before settlement and the period after settlement when the vendor remains in the business to assist the purchaser. The purpose of the trial before completion is to check the takings to make sure they are as described by the vendor when the business was sold to you.

This is the last chance for the buyer to check the vendor's figures.

STEP 9 - Completion

On completion we expect to receive an assignment of the telephone service, an assignment of the business name if there is one, either a new lease or an assignment or the existing lease and evidence of the long service leave and holiday pay the liability for which a new purchaser assumes if the existing staff continues to work for the new owner of the business. Adjustments are made for this. A stocktaker may be required to count the stock. This is often done immediately after completion but can be done the weekend or night before.

Important Notice:- This article provides a summary of the law. It does not cover the whole of the relevant law and is not a substitute for professional advice. Moreover, because it avoids legal language wherever possible, there may be some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications.

Your particular circumstances need to be taken into account when determining how the law applies to you. Make an appointment now with Andrew Rogers Lawyers to discuss your needs and how we might help you.