Selling your business can be a monumental step in your entrepreneurial journey. It requires comprehensive planning and strategic decision-making, with one of the key aspects of this process being legal preparation.
There are several critical steps you should undertake as a business owner to aid a successful sale.
Conducting due diligence
Due diligence is a significant step that should be taken when preparing for a sale.
This process allows potential buyers to evaluate their financial health, operations, legal status and overall potential of your business.
By conducting your own due diligence before listing your business for sale, you can identify and address any issues that may arise later in the process.
Self-conducted due diligence should include an examination of your business’s assets, liabilities, contracts, employment agreements and any existing or potential legal issues.
It is advisable to consult with a legal advisor to ensure that all aspects of your business are reviewed.
Resolving outstanding legal issues
Prior to the sale, it is essential to resolve any outstanding legal issues your business might have. This includes any litigation, disputes, contractual issues or regulatory compliance matters.
If left unresolved, these issues can cause significant complications in the sale process, leading to delays or even deal termination.
Remember, your potential buyers will conduct their own due diligence and any unresolved legal issues could deter them.
Organising documentation
When selling your business, you need to provide a large amount of documentation to prospective buyers. These documents include:
- Statutory books – Registers of members, directors and secretaries, and minutes of board meetings and resolutions.
- Contracts and agreements – Client and supplier contracts, employment contracts, leases and intellectual property agreements.
- Financial records – Profit and loss statements, balance sheets, tax returns and audited financial statements.
- Regulatory and compliance documents – Permits, licenses, health and safety records and other regulatory compliance documents.
Ensure these documents are accurate, up-to-date and organised.
Buyers will scrutinise these records closely and any discrepancies could potentially cause delays or the deal to fall through.
Drafting a confidentiality agreement
Before sharing sensitive information about your business, it is wise to have potential buyers sign a confidentiality or non-disclosure agreement (NDA).
This document protects your business by preventing buyers from sharing or using the information you provide for their own benefit.
For more information about creating an effective NDA, please see our previous blog here.
Preparing a business transfer agreement
A business transfer agreement outlines the specifics of the sale, including what is being sold, the sale price and the terms and conditions of the sale.
It is vital to work with a legal professional to ensure this agreement is legally sound and covers all aspects of the transaction.
Complying with TUPE regulations
If your business has employees, you need to be aware of the Transfer of Undertakings (Protection of Employment) regulations, or TUPE.
These regulations protect employees’ rights when a business is transferred to a new owner. You are required to inform and consult employees or their representatives about the planned business transfer.
To ensure a smooth and successful sale, it is essential to prepare thoroughly and address potential issues proactively.
Consulting with a legal professional experienced in business sales is vital to navigating the complexities of the process.
For more advice and support on selling your business, get in touch today.