of Businesses and Companies
Buying or selling a business is a major
decision and (where you are the owner and operator of that business)
often an emotional one.
There are a number
of matters which you should consider in undertaking this action.
A small business
is one where the goodwill, plant & equipment, fittings are sold
for $350,000 or less.
The Vendor must provide
the Purchaser with a Form 2 giving details of the assets, liabilities
and income of the business.
There are standard
sale contract documents which can be used and adapted to your needs.
If you own your business
personally or in a partnership, then you will be selling the various
assets of the business.
However, if you operate
the business through a Company, the Purchaser may want to buy all
of the shares in the Company and acquire the business in this way
rather than purchase the business and it's assets.
You need to consider
what is being sold.
|Assets can include:
||Goodwill (the value of
the reputation of your business)
(Customer Lists, Supply Lists, Price Lists)
||Plant & equipment,
||Raw materials (used to
produce products made by your business)
Intellectual property (names, logos, domain names, web site , things by which your business is known, processes used in your business)
||Stock on hand
|Other relevant matters
||Employees - whether the
Purchaser will "take over" any employees of the business
Lease of premises - if the business operates from leased premises then the Purchaser must either take a new lease or an assignment of the existing lease. The landlord's consent must be obtained. A Disclosure Statement needs to be done and, assuming it is accurate, then on assignment the Vendor/Lessee is no longer responsible under he Lease nor is any guarantor the lease.
||Leases of plant and equipment
- similar issues apply to those for a lease of premises
||Outstanding orders -
whether the Purchaser will take over and complete outstanding
||Supply, customer and
other contracts - the Purchaser may take these over or enter in
to its own arrangements with suppliers and customers
debtors - the Vendor usually collects any debts owed to it before
the settlement date.
|| How to advise
customers of the sale of the business.
Various matters are
likely to require adjustments between the Vendor and the Purchaser
at settlement. These can include:
|| rent, rates, stock
||connection of services
(water, electricity, gas) - transfer to the Purchaser
|| Insurance - the Purchaser
should take out insurance for the business and as required under
||Telephone and fax lines
- transfer to the Purchaser
||Yellow Pages and other
- the Vendor should be required not to use any confidential information
concerning the business after settlement.
||Restraint of Trade
- the Purchaser is buying a business and may look to protect it
by requiring that the Vendor and its operators not operate a similar
business for an agreed time and within an agreed radius from where
the business is situated. The time and area depend on a number
of factors and should be reasonable in all the circumstances.
- if the business is a franchise, there will be other issues to
consider including the terms of the franchise arrangements.
- any decision to sell the assets of a business or the shares
in a company should be carefully considered.
It is important
that both the Vendor and the Purchaser communicate to ensure that
they both understand and agree on 'the deal". They should then
have all relevant accounting and legal issues dealt with and properly
documented. It can be a confusing and emotional time, so don't assume
things. Check, ask questions, be involved, ensure that you manage
the process and that you are in control of the process. Your time
and effort and any legal and accounting costs will be well spent if
you avoid problems and possible costly legal action at a later date.
There are many other
matters which must be carefully considered if you are buying or selling
a business. The matters detailed here are indicative only.
It is important to
obtain legal and accounting advice on the structure and implications
of the deal.
We are happy to work with you and your
other professional advisers to have the transaction proceed as smoothly
This article is general in nature
and for information only. It should not be acted upon without obtaining
specific legal advice.
©Anne Hodgson & Co Lawyers,
Tel: 03 9578 7444 Fax: 03 8677 2962 Email: email@example.com