Buying and selling a business can be a complex matter that is often difficult to understand if you are not legally trained or if you lack the experience. This article will try to explain the contents of the document in simplified form to help understand its core elements.
The basic framework of all business sale agreements are largely the same, and most will have clauses covering specific areas. The following provides a good starting point for both the seller and purchaser to discuss:
- Division of the price between goodwill, equipment and stock.
- Assets to be excluded from the sale and to be retained by the seller.
- VAT – whether this will apply to the sale price.
- Apportionment of outgoings.
- Payment of the sale price – the manner in which the payment is to be made on completion.
- Employees – if employees will transfer with the sale. If so, then Transfer of Undertakings (Protection of Employees) Regulations 1981 will apply.
- Leasing or HP agreements – whether they will transfer with the business.
- Apportionment of liabilities.
- Warranties – whether any warranties will be given by the seller. Also, whether any third party warranties will be transferred to the buyer.
- Premises – whether the premises occupied by the business will also be transferred in the sale. Please note that if the premises are leased, then that will require a separate transaction involving the landlord of the premises and could include a lease assignment or a fresh grant of lease.
- Restrictive covenants – these can be restrictive covenants created by the seller in the sale agreement or can be existing covenants created by a third party.
It is important to note that the above list is a non-exhaustive list. Every business sale is individual and there will be specific clauses applicable to it.
If you are buying or selling a business then it is strongly advisable that you consult a commercial solicitor who can assist you in the process.