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.
Finance is often one of the biggest impediments to a buying a business so it’s prudent to apply for your business loan as soon as possible. Once you have located a business you want to buy, you should contact a lawyer and other professionals such as financial advisors, valuers and accountants, who can help you decide if the purchase would be a good investment.
The seller usually instructs their solicitor to draft the contract for sale which is forwarded to the buyer’s solicitor. Your solicitor and/or accountant can advise you in regards to:
- The key elements being purchased, and whether it is necessary to purchase the business. There may be taxation or other financial reasons to only purchase the equipment used in the business, or have a licence granted to operate the business, or purchase the company that operates the business, rather than purchasing the whole business. All of these options will result in you operating a business but each is accompanied by 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. Eg. sole trader, incorporated company, trust.
Contract Advice and Negotiation
We closely examine the contract for sale of business drafted by the seller’s solicitor. We advise you in regards to the terms of the contract and, if necessary, negotiate amendments with the seller’s solicitor to better suit your requirements. This process involves the consideration of aspects of the purchase which may have not as yet have arisen 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 by the solicitors, 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 some or all of the following:
- Finalise loan documentation (if the contract is not subject to finance loan documentation it must be finalised prior to the exchange of contracts);
- Enter into employment contracts;
- Obtain Public Liability Insurance, Worker’s Compensation and any other necessary insurance (such as plate glass);
- Obtain bank guarantees in compliance with the terms of the lease (if any);
- Obtain any required licenses or approvals;
- Notify suppliers/clients of new ownership, ABN, and bank details.
The next step
We are experienced in acting for purchasers of businesses. If you are thinking about, or have already struck a deal to buy a business, contact us to support and guide you through the process.
