Important steps in selling/buying a business BEFORE signing a contract?
Before signing a contract, it is important that both the seller and the buyer are clearly identifying all the conditions, rights, responsibilities, and assets that are being transferred. Talk to Dawson & Gardiner and let our experienced solicitors guide you through the business sale process to avoid any problems.
You can expect the following steps:
- Preliminary negotiations
- Setting of special conditions
- Sign agreements
- Exchange of contracts: at this stage a deposit of 10% of the purchase price is to be paid by the buyer making both the parties legally bound to the contract.
- Buyer’s solicitor sends a “Requisitions on Title” to the seller’s legal team. This is a list of questions, which are to be responded by the vendor. If the answers are false or misleading, the Title provides protection to the buyer.
- Seller now performs several legal duties as stated in the contract for sale. These include, transferring the title, discharging mortgages, and acquiring lessor’s consent to a transfer of lease.
- The final step is the settlement day, which is to be mentioned on the contract for sale. On this day, settlement occurs with all the required documentations and cheques signed and transferred.
What is included when Buying or Selling a Business?
Buying or selling a business may include transferring the rights of the property, stock, business name, and several other business components to the buyer. There are many components of a business and you have the right to sell/buy whatever aspects you want, including:
- Registered business name
- Business premises (lease or ownership)
- Equipment, resources
- Fixed assets
- Current orders
- Supply agreements
- Any patents and trademarks
- Business licenses
For both the buyer and seller of the business, sale value can include any of the above and other component categories.
What is important in a business contract?
It is very important to have a solicitor work through the contract for the sale of a business whether you are the buyer or seller. The most important aspects are what is included in the sale. In particular Fixed assets and equipment and the Business Goodwill.
- Fixed assets and equipment: The Seller should provide a full inventory of assets and equipment and their “book value” which is the original value of the asset. It is essential that any bills and mortgages are mentioned as these must be paid on settlement. This category also includes the property where the business is conducted. If the seller does not own the property the buyer has to make sure they obtain the rights to use the premises under a renewed lease or transfer of lease. The Buyer can also choose to purchase the property from its owner.
- Business goodwill: This category is more vague than the above as it includes all the intangible components of the business. This includes the brand name of the business, its reputation, market penetration, its relationships with clients, suppliers, its staff, and other similar aspects. It also includes some other physical items including telephone numbers, emails, customer lists, and also the transfer of processes, techniques and systems. Other extremely important assets include the website and social media pages. The Goodwill plays an important role in the success of the business and the buyer and seller need to spend time determining the existing value and increasing the goodwill, respectively.
Selling or buying a new property can be a time consuming and expensive step in anyone’s life. Sale and purchase of businesses is even more tiring if you don’t have the right legal team to assist you throughout the process. Dawson & Gardiner can help during and even after the sale and purchase of their businesses in Newcastle and the Hunter Valley. We can help with drafting the contract to advising you on documentation and conditions that should be included in the contract, we help you through every step of the process.