Whether you are looking to retire or merely move onto a new venture, it is important to achieve a clean break from the business and ensure the terms on which you do so tie in with your future plans. Jack Stephenson, a solicitor in Harrison Drury’s corporate team, looks at some of the basics you need to consider.
What is difference between an asset sale and a share sale?
If your business is owned by a limited company, you can either sell the company’s assets or any shares in the company that you own. Selling the shares may achieve a clean break as the buyer would acquire all of the assets and liabilities of the company.
If your business is not run as a limited company, then there will be no shares to sell. You would therefore sell the assets of the business including the goodwill, fixtures and fittings, contracts and (if applicable) any intellectual property.
What are the important provisions to include in the sale documentation?
It is always important that the agreement to sell the business limits the possibility of the buyer pursuing you in the event that the purchase does not work out as planned. Important clauses might include…
- Warranties: A warranty is a statement of fact by you as to the state of the business. When selling a business, it is important that the warranties are limited as much as possible and that they are relevant to the business.
- Limitation of Liability Clauses: If the buyer expects you to provide warranties, it is important that your potential liability in the event that there is a breach of those clauses is limited. For example, common clauses would ensure that your liability is not more than the purchase price received from the buyer and imposing limits on the time period that the buyer has to bring a claim.
What happens to the employees when selling a business?
When selling the assets of a business, it may be the case that the employees are afforded protection under the TUPE Regulations 2006. Under the regulations the buyer will basically take your place as the employer of the employees.
Where the TUPE Regulations apply, there may be an obligation on you to inform and consult with the employees regarding the transfer.
What happens to the property when selling a business?
When selling the business, you may need to determine what happens to any arrangements you have in place with regard to the business’ premises. This may involve a sale of the property (provided you own it of course), or an assignment or a surrender of the existing lease. If you are selling the shares of a company, any arrangements already in place with the property may well continue as the company itself (as owner of the property or tenant under the lease) stays the same, it is merely the shareholders that change.
Whatever the position it is important that protections are included within the transfer documents ensuring that you are not liable for any breaches that might occur after you have sold the business.
Harrison Drury solicitors has a team of experienced corporate and commercial lawyers able to advise on all aspects of selling a business. If you are looking to sell a business and require advice, please contact Jack Stephenson on 01772 258 321.