Selling or Buying a Business

Buying or Selling a Business? Why You Need a Lawyer

Buying or selling a business is an exciting time. Whether you’re embarking on a new entrepreneurial adventure, or taking the next step in your life, our skilled professionals at Lees & Givney can advise you on the process, identifying your rights and obligations.

If buying or selling, our legal team works with you and your accountant in relation to the transaction.

Preparation for selling your business

A contract for the sale of the business (or agreement for sale of shares) must be drawn up once a buyer has been found and a sale price agreed upon. Depending on the nature of the business, it is highly likely that you will need to take a full inventory of all business assets. The contract should specify a timeframe to complete the transfer, ensuring allowances for unexpected delays such as obtaining a franchisor’s or landlord’s consent and transferring licenses.

Non-competition clauses

Vendor restraint clauses, or non-competition clauses, are typically included in contracts for the sale of the business. This clause defines the time and distance in which the vendor must not carry on any competing business. This could impact on the seller future business opportunities should the seller or its key personnel wish to continue to work in the same industry.

Training for the purchaser

Typically, the sale of business contracts will make provisions to train the buyer. This can take place either before or after the transfer of sale. Most often the seller will prefer to carry out any necessary training once a settlement is reached, however this needs to be negotiated and agreed upon upfront.

Valuing the business

Determining the value of the business will be of utmost interest to both parties. Before heading down the path of selling, it is worthwhile seeking advice from an expert in the industry. Valuation of the assets and goodwill of a business requires significant skill and experience. Keep in mind however, that a business is only ever worth what a buyer is willing to pay for it, so during negotiations all parties need to be very clear on what is included and whether it is inclusive or exclusive of GST.

Due diligence procedures

Due diligence is almost always the responsibility of the buyer. Typically the contract of sale will require the existing business owner to continue to operate the business in a professional manner, ensuring stock levels are maintained and employee obligations are upheld.