Sale of a Business Has To Meet Stringent Legal Conditions


Geoff Baxter

A business is set up only after a lot of thought, hard work and financial outlay. Equally, selling the business is a decision that also requires a lot of consideration, planning and thought. You have to be mentally prepared and financially ready to conclude the sale. The sale process and the deal that is struck with the buyer can be legally complex so it is essential that you have expert legal advice from a North Shore lawyer for selling a business.

A business that is to be sold has to be ready for sale, and must have value in it that buyers will see as worthy of any investment. You also have to make sure that you are in a position to address all the legal issues that will arise from this sale. It can also help to have an investment banker by your side, as well as other accounts professionals as well as your lawyers. Ensure that the appointment of an investment banker must also be vetted by your legal counsel, so that any terms for their services are properly laid down and documented, so that obligations on both sides are clearly defined. It can always help if any legal advice that you get comes from lawyers who are familiar with mergers and acquisitions and the legal requirements of concluding the required documentation of the sale. It will also be useful if you also pin down the lawyers you appoint on any fees that you will have to pay them for their services.

When you want to sell your business, it is almost certain that any buyers will require reviewing all the corporate records of the company, financial information, existing contracts, details of staff and any other matters that affect business operations. In most cases, buyers will also have legal representation and they will insist on the correctness of any documents presented to them, and their having been maintained as per rules and regulations in force for the conducting of a business.

Before you present any documents or get into discussions with any buyer, it is essential that you enter into non-disclosure agreement so that all information concerning the sale, the company, and relevant matters are kept confidential, even in cases where such negotiations do not reach an acceptable solution. This also prevents the prospective buyer from taking advantage of any information that they gain, regarding contracts, rates, staff salaries or any other matters, to further their own business.

Once negotiations are nearing success, it may be necessary for the buyer to give a letter of intent that need not be binding. This letter of intent outlines the broad terms of any agreement giving price, closing date and other vital considerations of the sale. This letter of intent can serve as a guide for lawyers from both sides to prepare the final sale document. In many cases, it also narrows down the areas of disagreement, which the principals can then tackle and come to a proper conclusion that allows the final sale document to be prepared.

At such a stage, buyers will insist on a clause that will insist that the seller keep all matters regarding their negotiations confidential, while the final sale documents are being prepared. As this can take some time, due to the legal requirement and terminology that have to be part of any final contract document, it has to give sufficient time for the lawyers handling the sale of your North Shore business, during which this confidentiality has to be maintained.

Quite often at this stage, a portion of the agreed price has to be paid, and in most cases, the balance is paid within agreed times or adjusted against share values, both of which must be completely documented and agreed to in the negotiation.

If you have a business on Auckland’s North Shore, lawyer for selling a business you might want to talk to is McVeagh Fleming and Co. They have an extensive commercial department who have worked with many of Albany’s businesses. Call them and they will be pleased to help.