Buying or selling a business or the company operating a business is a big step. It is essential that your interests are protected and that you are aware of the risks and pitfalls.
The terms of the transaction should be properly documented. From the buyer’s point of view, this will make it clear what is being bought and how their investment is to be protected, with appropriate warranties and restrictions on the seller. From the seller’s point of view, this will provide clarity as to how payment will take place and how any liability from warranty claims is to be limited.
In the present economic climate, with restricted bank lending, seller loans (or deferred payment) have also become an integral part of a number of sales. Protecting the seller’s “investment” by negotiating guarantees and security for the loan can therefore also be critical to the success of any sale and should be considered carefully.
The transfer of a business will usually involve employees and the issues presented by the employment regulations, commonly known as TUPE. These regulations can be a minefield for the unwary. Both sellers and buyers can be at risk if the appropriate procedures are not followed. Consultancy or service agreements for the sellers’ continued involvement in the business postcompletion may also be required.
Furthermore, the treatment and use of capital allowances on plant and machinery is becoming a significant issue given changes in legislation. Documenting the correct allowances and asset values is essential to protect this investment and to ensure you can claim allowances in the future.