After a number of years of business development and profit-making or market regeneration and market growth, you can consider selling your business or Company. As you would have seen from our sections on purchasing businesses or companies, a number of questions would be asked by way of proper legal due diligence, which would need to be addressed as part of the sale process.
Typically a Company will face scrutiny in relation to its legal documentation and following a sample list of checks and balances which may place a Company in a healthier legal position for the purposes of sale:
- All premises from which the company operates should be occupied on foot of a written lease or licence, especially where that premises is owned by the principals of the company. You should collect the leases and/or title documents, as these will be required.
- Commonly questions are asked about planning permissions and fire safety compliance in respect of the premises from which the company operates. If any works have been undertaken in redevelopment or fit-outs by the company, you should be advised by a planning expert in advance of any sale of potential planning or fire safety issues that might hinder the sale of the company or affect the full sale value so that these points can be negotiated around in the discussions for sale.
- By law, every employee should have an employment contract. The employment contract should be properly constituted, incorporating (or making reference to) a disciplinary process. The employment contracts should be collected and copied.
- A Company should appraise itself of the environmental & waste disposal and packaging regulations that apply to it.
- If intellectual property, e.g. trademarks, design patents or domain names, are in the personal names of Directors, these would need to either be properly licensed to the Company (typically, these would have to be irrevocable licenses) or indeed transferred to the Company as part of the sale process. If you are selling a business, you should be advised as to the tax implications of the transfer of these assets into the Company.
- The Company’s property insurance, public liability and employers liability insurance, and (if in the business of retail sales of products) product liability insurance should all be up to date, and copies of policies should be available to present to the Purchaser as part of the legal due diligence.
- You should approach your Accountant as to whether operating cash flow is to be left in the business as part of the sale or extracted. This is commonly a commercial term that is agreed upon between you and the purchaser. The most tax-efficient model dictates the amount left in the Company.
- You should ensure that all bank mandates for the operation of the company’s accounts are properly organised, as these will need to be transferred as part of the process of the sale, which means they will need to be executed by the existing mandate holders to authorise the transfer to the nominated parties of the company purchaser.
The above is a brief checklist of typical issues that can be encountered in the sale of your Company. We can advise on how to ensure a smooth transfer process and identify any issues at the outset which may need to be addressed or dealt with or consider this part of the commercial transaction. A properly advised and prepared Vendor will be in a position to agree on a purchase price with confidence and be assured that issues will not arise in the sale of his or her business that may affect the commercial terms otherwise agreed.
If you are considering the sale of your business, you should schedule a meeting with us to sit down for a no-obligation consultation to discuss the legal health of your Company. If you wish to schedule an appointment or even just meet us for a cup of coffee, please feel free to contact us.