LEGAL SERVICES - COMMERCIAL LAW

Selling a business

What is the True Profitability of Your Business?

Any purchaser will expect to have his accountant inspect all your books. Are they up to date and accurate? Be assured the purchaser will act on what you say and may want to sue you if the business later fails, notwithstanding that the failure was caused by the purchaser's incompetence.

Do You Trade Under A Particular Business Name?

If so, is it a registered name? Do you have a licence to use the name? If so, we would expect you to have confirmation of these matters at the time the contract is prepared.

Will You Be Selling Your Stock in Trade and Your Book Debts?

These assets should be particularised as they may form part of the price to be paid. Some businesses are sold on a "walk in, walk out" basis. This does include the book debts and the stock in trade.

Will you be selling your business as a Going Concern for GST purposes?

Is Your Lease Up to Date and is Your Landlord An Approachable Person?

Are you in breach of your lease? If you are in dispute with your landlord he may be entitled to refuse to consent to the transfer of lease. You may need to resolve this issue before the sale is negotiated. Is the lease current? If so, the lease will need to be transferred. If you do not have a long term lease then the purchaser will be unlikely to buy your business without the security of knowing that he will have a lease for some time.

You Owe Any Money on Your Business?

If so, you may have given a bill of sale (a form of mortgage) which will need to discharged on settlement. Sometimes these matters are overlooked until the last minute, causing delays.

Non Competition Clause

Do you know that your purchaser will more than probably require you to enter into a restraint of trade clause preventing you from doing similar work within a radius of at least a few kilometres of your business for some years? You must be sure that whatever future work in which you intend to be involved will not conflict with such a proposal. The normal clause is wide enough to catch a vendor who trades as a director agent consultant or employee of a competitor.

There Any Outstanding Notices?

For example from the Council or the Landlord requiring you to change your work practices or rectify some apparent problem? If so, this will need to be attended to before completion unless you raise it with the purchaser and make it the purchaser's problem.

Purchasers Trial

Do not let the purchaser in to see how the business functions until after you have a written commitment from the purchaser to proceed with the sale. The best commitment is a signed contract - or at least a Confidentiality Agreement.

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.