10 things to check off your to-do list when selling your business.

Geoff Hazlewood, our corporate and commercial partner, and Magnus McManus, our commercial property partner, share their top legal tips to help you when selling your business.

Get your accounts in order

Before selling your business, check that your contracts and permits are up-to-date – this includes property, environmental, operational, and waste permits. Also, ensure your client and employee records are current.

Allow yourself as much preparation time as possible. This will make it easier to write the disclosure letter, showing your business is in good health and making sure there are no inconsistencies.

 

Order a full business review

We can assess your business for any potential risks. We’ll check your permits and property leases to make sure they are current and covered by the correct legislation.

For help marketing your business, contact your accountant or corporate finance advisor. Once you have a buyer in place, contact us for help with completing the sale.

It’s important that you have a non-disclosure agreement in place before sharing any sensitive data with the buyer and that balanced seller and buyer protections are correctly negotiated and agreed upon.

Warranties will also need to be checked out. Any that are too broad in scope, have insufficiently detailed disclosures, or are outside of your knowledge could prove ineffective and may leave you liable to pay back part of the money you receive from the sale.

 

Decide if you want to sell your premises

Your premises don’t have to be included in the sale – you can free-lease them or use them for another purpose. You could even consider setting up a short-term lease with the buyer while deciding what to do with them.

Commercial property can be a valuable asset. It’s worth learning all your options before making a final decision. Our property experts can value your company’s assets and offer guidance and advice.

You’ll also need to check that all property compliance documents are up-to-date. In most cases, you will need an Energy Performance Certificate, an asbestos survey with any recommendations actioned and potentially testing certificates for equipment and fire risk assessments before you can sell or grant a short-term lease.

Speak to our property experts for guidance on this, as soon as possible, after agreeing to terms of the sale.

 

Speak to your landlord

If you have a property lease, you must speak to your landlord before completing the sale. They may need to approve the transfer of the lease, from you to the buyer, depending on what’s stipulated in your lease agreement.

The landlord may need several references for the buyer to approve.

You must ensure all rent payments are up-to-date before completing the sale of your business. If you applied for a rental holiday during Covid-19, all back rent must be paid in full before the business is handed over.

 

Diversify your client base

If you have one major client that’s responsible for most of your profits, this can look risky to a buyer. What if you lose the client during the handover? The buyer could lower the price that they’re willing to pay.

It’s best to broaden and diversify your client base to maximise your business’ potential and value.

 

Protect your staff

Benefit from the knowledge and guidance of our employment team to ensure staff are fully protected during the sale of your business, for their peace of mind and to avoid any liabilities.

With some deal structures – in particular asset sales – it’s legally required for you to consult staff about the sale. However, this is not the case for most share sales.

You may decide to hold off on revealing details of the sale to your staff until the deal is agreed and guaranteed to go ahead.

In a few cases, owners prefer to let staff know rather than allowing them, and indeed customers and suppliers, to find out through the grapevine. It’s common for employees to notice you’re away at meetings or rooting around in filing cabinets trying to find documents for responses to due diligence enquiries.

No matter what you decide, we’ll be on hand to offer support and guidance and ensure you can continue to run your business efficiently while setting up sale negotiations.

 

Plan your budget

Engaging a solicitor early on can help you save money. Selling a business can be tricky and involves lots of moving parts. One missed thing could cause expensive legal action or you to lose out on part of the money you receive from the sale. Plan ahead to get the help you need to stay on budget.

 

Be mindful of other parties involved in the sale

If a bank is involved in the sale, some formalities will need to be dealt with. Instructing a solicitor can help you manage these relationships.

A bank-funded sale can be quite complex and some expectations will need to be met – any mistakes could cause funding to be delayed, and the sale to be put on hold.

If a bank fund is involved, they will determine if they pay the purchase price in full on completion or split it across a series of payments. You’ll need to clarify these details.

 

Check the timescale of the sale

If a business is in administration, the sale will need to be completed quickly and on time.

So long as we are made aware of any deadlines ahead of time, we can help you meet them, and can inform you in your first consultation with us, if they are realistic.

Other proceedings may take longer and involve more negotiation – it depends on the size of your business, the number of parties involved in the sale, and the complexity of the business and deal structure.

 

Seek legal advice as soon as possible

Speak to a solicitor as soon as you can. We can help you prepare your business for sale, inform you of any legal pitfalls, and make the process simple and stress-free.

The more involved we are in your business from the start, the easier it will be to offer advice and gather the information you need. You can benefit from the expert advice of all our specialist legal teams to help you save money, manage, grow, and sell your business.

We have continued to offer uninterrupted service to our clients throughout Covid-19. We can arrange a meeting over a video call or phone.

We Can Help You

If you have any questions regarding selling your business, or any other Corporate & Commercial matters, please get in contact with us on 0330 404 0777 or email enquiry@ashtonslegal.co.uk.