Essential Advice When Getting Ready To Sell Your Company

Business plans involving ”˜selling’ have been swayed by prospective alterations applied to the capital gains tax regime. Pre-sale your purchaser will require assurance of no unqualified risk in the significant domains of your business. If in the situation of ”˜multiple interest’ meaning you have more than one party taking interest in you propositions, the company should follow the normal procedure of setting up a data room, holding the fundamental documentation that is legal and financial.

A review by potential purchasers would be made available to them. The content in the data room will have applied rules regarding ”˜use of’, including non-disclosure agreements. Before the time comes to compile the information for the data room, a completed review of the extent of proper protections is needed, which you are going to need plenty of time to plan for. It will ordinarily be too late to amend a problem if not done in good time, so you would then need to think of the problems that are likely to occur.

A frequent dilemma known to pop up is the contracts of employment. For the purposes of accommodating legislative and case developments they will need reviews. Are the contracts inclusive of restrictive coventants for the employees? If the restrictive covenants were drafted over two to four years ago for example, an important question would be has the law altered, diminishing their positions thus leaving your customers and goodwill defenceless against your former employees? Then ask yourself how much time is required to re-negotiate contracts with the corresponding employees.

Intellectual property is another area where you may find gaps in legal protection. As for designs – you will need written design rights from any consultant or third party involved in developing the design, as they are such an important asset! If not done you are exposed to the inability to stop that art of the design appearing in a competitor’s product as the third party may own part of your assets. This is an issue is a rather frequent one to arise, where a business that started as an owner/manager or partnership was later conformed into a limited company.

As with everything, this is not risk free. Your company may face claims post sale. The chances however can be lessened by going over the obligations and liabilities of the company, under the contracts entered into with suppliers and customers. Something not to be overlooked is the assessment of the oppressiveness of obligations and potential liability of the company – ”˜warranties and indemnities’. Also it’s an absolute necessity that you triple check terms and conditions, to guarantee the non- expiration or need for re-negotiation, as control is taken over by a new owner.

Terminating contracts maybe a possible occurrence that could result in a troubled potential buyer, negative effects on the company financially or just serving very little purpose. All arrangements (trading, business and other) should be put in writing! Especially when involving third parties. A must is for the company to make sure ALL contracts are signed and dated including documented and formalised adjustments.

Scenarios that feature partners opting to go in a different direction (solo) in the early stages of the company’s expansion, result more often than not with the company buying out the departed. You should know there are several formalities to be followed in this circumstance. Failure to do so may mean the declaration of ineffective purchase and the former shareholder regaining their position within the company. At this point you would have no choice but to delegate and get then to sell the shares to the company. But a question you face – Is this viable?



Whilst the proximity of these dilemmas is fairly resolvable, you should be aware and expect delays in transaction. The delays can manifest in ways that are critical if the purchaser/investor has sought after an alternative target of interest in this time period. But fear not as with the company setting in place a legal risk management plan, most of the conventional complications can be ameliorated. If a plan has not been set, a company debating a sale/share offering should review problems that could come up, to stop complications or cessation during the sale/offering process.

By Luisa Savino