Buying or selling your business can be an exciting time but with so many aspects of the sale to deal with it can also become overwhelming.
To ensure the deal goes through as quickly and easily as possible it's vital that you stay on top of your paperwork. Specifically, all of your legal documents should be prepared as far in advance as possible and presented to the relevant parties as soon as they're needed.
We've put together a guide to some of the most important legal documents you'll need to buy or sell your business so you can make sure you stay on track.
Heads of Agreement
The main terms of any business sale or purchase is likely to be laid out in a document called a Heads of Agreements or Heads of Terms. This document is a preliminary document that will often include a clause stating that it is "subject to contract", so you and your buyer/seller can discuss initial terms without being bound into a contract. Although usually just an outline, this document can provide detailed information about the proposed purchase, including price, conditions for completion and warranties.
If you are selling a business you will be required to fill out a due diligence questionnaire, which will provide the buyer with vast amounts of information about the finer details of the business. This step is crucial - as a seller you have a responsibility to provide detailed and honest information about the business you are selling, while buyers have the task of carefully searching the documents provided to ensure they are happy before making the purchase.
If you are buying a business you could be required to sign a confidentiality agreement so the seller can be sure their clients and staff will not be made aware of any potential transaction before it goes ahead. For those selling, this can be a perfect opportunity to protect yourself from any potential issues going forward. Specifically, you can prevent your staff from becoming worried unnecessarily should the deal fall through and you can prevent your details from becoming public if the buyer pulls out.
Asset purchase agreement
If you're buying a business via its assets your lawyer will be required to prepare an Asset Purchase Agreement. Sole trader and partnerships are all sold via assets, while larger businesses can be sold as shares. If a buyer and seller agree that the business will be purchased via assets, you must decide which assets are being purchased. This could include machinery, stock, contracts and property.
Share purchase agreement
If you choose to buy a business via shares your lawyer will be required to prepare a Share Purchase Agreement. If possible, sellers will often choose to sell their business via shares to allow them a clean break rather than a part purchase. This document will usually include warranties, indemnities and limitation of liability.
Your purchase or sale is likely to require additional paperwork but this list should give you a good idea of where to get started. Make sure you do your research and speak to your lawyer to ensure that nothing is missed, so you can feel confident that your purchase or sale will go through as quickly and efficiently as possible.