Overview of topics

Aim – share our experiences so you are better prepared to buy or sell a business or company

Method – examples from practice

Common pitfalls

Theme - Business owners don’t invest enough time to prep their companies for sale

Share sale

New Owner C

Business/asset sale

New OwnerC

Assets:IP

VehiclesLeases

ContractsStaff

Debtors

Due diligence

Pre-contract enquiries

Involve legal team early

Financial enquiries

Legal enquiries

Very detailed for share sale

Warranties and Indemnities

Warranty – An assurance or promise in a contract, the breach of which may give rise to a claim for damages

Warranty limitations – to limit Seller’s risk

Indemnity - undertaking by one person to meet a specific potential legal liability of another. An indemnity entitles the person indemnified to a payment if the event giving rise to the indemnity takes place

Financial Preparation

Who is receiving the money? Consider Entrepreneur’s Relief

What impression do your accounts create?

Company books

Share held by deceased

Share transferred incorrectly

Share and other registers not up to date

Public record not up to date

Employment

Employment contracts not modernised

Employees have different terms from the paper contracts

Private arrangements

Historical issues

Key staff

Tie in key employees

Incentivise for sale

IPR

Trade marks

Patents

Designs

Software

Domain names

Customer contracts

Repeat income

Change of control

Foreign assets

Check foreign process

Check foreign records and filing

The Cinderella Department

Property issues are often not considered until the process is well under way.

Third parties will not have the same

commercial pressures to complete

to deadlines.

Banks?

Landlords?

Issues common to both freehold and leasehold deals

Due diligence

CPSEs

Asbestos reports

Freehold issues

Who owns the property?

Will new owners need a lease?

Funder’s approval?

Any occupiers?

Leasehold Issues

Business sale or share sale?

Change of control?

Landlords

Consent not to be unreasonably withheld or delayed?

Accounts

References

Guarantees

Rent deposits

And finally

Schedules of dilapidation

TUPE

Transfer of Undertakings (Protection of Employment) Regulations 2006 Do not apply to share sales Do apply to business sales “Undertaking” “Economic entity which retains its identity”

Contract of Employment

All sellers rights and duties under employment contracts are transferred to buyer at completion

Any act of omission shall be deemed an act of the buyer

Variations of contract void

Transfer and Dismissal

No transfer if employee objects

Employee objection will result in lawful termination of employment with compensation

Dismissal can be fair if it is for “an economic, technical or organisation reason entailing changes in the workforce” (ETO reason)

Employment Information

Supply of employee liability information

To be supplied at least 14 days before transfer

Information regarding “measures”

Employee Consultation

Elect Representatives

Consult Representatives The fact of, date for and reasons for the transfer Legal, social and economic implications of the transfer Sellers “measures” Buyers “measures”

Post Transfer

Compromise Agreements

Note continuity of employment is not broken

Subsequent changes to employee contracts

No specific time limit where changes are transfer related

Buyer pressure

Buyer can apply pressure during buying process

Price can be suppressed

Buyer can lever other concessions

Process can be delayed

Costs will be increased

Business lawyers adding value