If you are considering buying a small business, there is a legal process after you shake hands which may take weeks or months to finalise.
Its prudent to apply for your business loan as soon as possible. Once you have located a business you want to buy, contact a lawyer and other professionals such as financial advisors, valuers and accountants to help you decide if the purchase would be a good investment.
The vendor’s solicitor usually provides the buyer’s solicitor with the contract for sale. Your solicitor and/or accountant can advise you in regards to:
- what is being purchased, and whether it is necessary to purchase the business. There may be financial reasons to only purchase the business’s equipment, or a licence to operate the business, or the company operating the business, rather than the whole business. These options all result in you operating a business but each has different legal implications;
- advice on the contract for sale our business;
- Licensing or qualification requirements for your industry;
- The type of entity to operate your business.
Contract Advice and Negotiation
We closely examine the contract for sale of business drafted by the seller’s solicitor and advise you in regards to the terms of the contract. Where necessary, we negotiate amendments with the seller’s solicitor to better suit your requirements. This process involves the consideration of aspects of the purchase including:
- Ensuring that the appropriate and complete equipment is listed as inclusions in the contract and that the description in the contract matches the equipment on site;
- Ascertaining whether any of the equipment is subject to hire purchase arrangements, a finance charge, or a mortgage to ensure clear title on settlement;
- Any training period to be provided by the sellers;
- Treatment of any debt/creditors, unbilled fees, and work in progress up to the point of sale;
- Whether a lease is to be assigned to you;
- Whether you are re-employing existing employees; and
- Whether registered intellectual property is to be transferred to you.
Between exchange and completion
Upon agreement being reached on the terms of the contract, it is signed and contracts are exchanged, making the agreement legally binding.
The agreement will specify the role of the parties between exchange and settlement (when you pay the balance of the purchase price). During this post exchange – pre settlement period you must attend to at least some of the following:
- Finalise loan documentation (if the contract is not expressed as being subject to finance, loan documentation must be finalised before exchange);
- Enter into employment contracts;
- Obtain Public Liability Insurance, Worker’s Compensation and any other necessary insurance;
- Obtain any bank guarantees required by the lease;
- Obtain any required licenses or approvals;
- Notify suppliers/clients of new ownership, ABN, and bank details.
Here to Help
Contact us for free no obligation initial telephone advice and representation if you are thinking of buying a small business.
