Selling a business can be tough and there are many things to consider when preparing the sale of business contract. The main items which need to be considered when selling a business have been set out below. To ensure that a sale of business contract encompasses the price and all the terms that have been agreed, a sale of business contract should be professionally drafted by a business solicitor.
Each party to the contract must be correctly identified. This may seem quite obvious, but it is an essential part of the contract which is often overlooked. Incorrect party details may cause undue delay at the time of settlement. The sale of business contract should clearly identify who is purchasing the business and in what capacity. Is an individual purchasing the business or is it an individual purchasing on behalf of a trust or another entity? The purchaser and its capacity to complete the sale must be clearly indicated on the front of the contract.
The contract should make clear what you are selling, which may include any or all physical assets, business records, licenses, logos, trade secrets etc. If your business is a health or medical practice, you may also be selling your patient database in addition to all the equipment in the practice. As the seller, it is your responsibility to set out for the purchaser, what exactly it is that you are selling. The purchaser will be able to review this list, if there is anything missing that was agreed, it will have to be added into the contract.
As the seller, you are required to disclose important information to the purchaser. If you do not do so, under the standard sale of business contract, the purchaser will have rights to rescind or terminate the contract. Information that needs to be disclosed to the purchaser may include information about any business liabilities or debits, the employees, employee entitlements, licenses required to operate the business, etc. There are instances where a seller can be held responsible for liabilities that were not disclosed when the purchaser purchased the business. If you are unable to differentiate between what you should be disclosing and what does not need to be disclosed, then it would be worthwhile consulting with a business solicitor to ensure that you are meeting your disclosure requirements.
Does your business operate under a lease? If you are selling your business, you need to check the terms of your lease to ensure that you have rights to assign or transfer the lease to the new purchaser. Standard leases usually have terms which require you to obtain the landlord’s consent before you assign or transfer the existing lease to another party. The lease may be of substantial value to the purchaser and if you are unable to transfer the lease, you may not be able to sell your business. If you are unsure of your rights to assign or transfer an existing lease, it would be worthwhile having it reviewed by your business solicitor.
Selling a business can be a tricky process and depending on the nature of the business, there may be certain factors which need to be taken into account in the sale of your business. An experienced business solicitor will be able to prepare your sale contract, answer your questions and assist you through the entire sale process.