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Sale of a Business Has To Meet Stringent Legal Conditions

Ambro

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.

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Why Small Businesses Should Have A Buy/Sell Agreement

Steve Graham

Steve Graham

If you own a company with a business partner, you will have likely formed it in a legal fashion. You have growth, you file your taxes on a regular basis and you feel good about it. Suddenly, your business partner is bankrupt or divorced. What is going to happen to his portion of your business? Will it go to his soon to be ex-wife in the settlement? What about his children? Will they have a say in it? Or, do you suddenly own the entire business? How exactly do you go about protecting yourself and the business from such an unforeseen event?

You may wish to consider a buy/sell agreement clause for your business. Think of it as a will or a pre-nuptial agreement type issue. It will lay out how such events will work out if there are such unforeseen circumstances like a death, a retirement, a bankruptcy, a divorce or even a disability of one of the partners or owners. It lays forth what is going to happen to the business when such unforeseen circumstances occur. IT states how such things will be dealt with and if someone must sell their portion of the company and for what price it must be sold for.

Every Business Needs One

While things may be going smoothly for now, it is wise to try and think ahead to any potential circumstance. Create a Buy/Sell agreement that is designed for your specific business and to meet your exact needs. Make provisions as to the portion of the business that can be sold and to whom for what price. Select language that allows for the insurance policy to pay out to a potential sale.

More importantly, this agreement can also prevent the co-owner from transferring their portion of the company to any party that you do not want involved in your company. If the partner in the company should suddenly become divorced the ex cannot take control of their portion of the company unless it is already in the agreement.

Even if no such events occur, this Buy/Sell Agreement is important. If the co-owner is burned out and needs to leave the business, the agreement can detail which share can be sold and to whom. It can include provisional owners and provides shareholder protection in case of any unwanted circumstance.

This agreement is vital to your company. It’s vital to you. It’s vital to your business partner. It should be done as soon as the company is created.

For companies on the North Shore of Auckland, McVeagh Fleming and Co is one of the leading commercial and business law firms. They can help you draft a Buy/Sell Agreement at the time that you form you company.

For more information, go to their website www.mcveaghfleming.co.nz/.

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Why It Is A Good Idea To Establish A Shareholder Agreement Before Starting A Business

 

North Shore commercial lawyerIf you are starting a business with others as partners and you wish to incorporate your business, it is vital that you establish a shareholder agreement prior to opening your doors for business. The time to get everything ironed out and agreed upon is the time before any actual business is transacted. This simply sets the stage for agreement among the shareholders of the business, as each one will sign off on it, signifying agreement to the terms.

Shareholder agreements are necessary in order to protect the shareholders because if anything goes wrong and a disagreement ensues, the agreement is the document that everyone can stand on, and one which will hold up in a court of law, if drawn up properly. Having a well thought out agreement in place will help to solve any disagreements as far ownership percentages, as well as rights and privileges of the shareholders.

The terms of the shareholder agreement will outline who the owners of a company are, and the nature of their roles in the company. Roles and duties can change as time goes forward, but if they do and when they do this can be noted as amendments to the agreement itself. Since the agreement and the duties will be agreed to in writing in front of witnesses and notarised, there will be no disagreement outside of the shareholder agreement that will be recognised in court. Disagreements can escalate very rapidly to being out of control and unless there is something in writing to verify the original intent, a company can be destroyed by infighting.

Meeting between Start-up directorsIf there are disagreements that occur later in the company’s lifespan, then there should be a mechanism to have one shareholder be able to buy or sell shares to help in mitigating the dispute. Also as far as duties, there can only be concessions made if all the shareholders agree. The idea is that since all the shareholders started the company in a cooperative manner, there should be mechanisms in place to keep it that way.

Also in the agreement should be a plan of succession in case one or more of the shareholders should die, retire or becomes incapacitated. If a plan is already in place when and if these events occur, then there is no question as to how it will proceed to realign the ownership and duties of the shareholders. A plan for buying and selling shares should be in place to transfer ownership to the remaining shareholders if such an even should occur.

If a shareholder dies, then his shares would normally go to his heirs when his estate is probated, and this could spell disaster for the company as you would have an inexperienced relative involved with the company. If a buy and sell arrangement is in place, then the estate of the deceased would be obligated by the terms of the agreement to sell the shares back to the company in return for a prior agreed to amount. The money to pay for the purchase back can be funded with a life insurance policy paid to the corporation, and then redeemed to the surviving relative, usually a spouse, for the exchange of the shares of stock.

Never rely upon oral agreements, as they are as fickle as the wind, as it is very difficult to get an oral agreement to stand up in court, unless there are iron clad witnesses, and then it can be quite a challenge. Always have written agreements that are witnessed and notarised by a licensed notary. In this way you will always have an iron clad shareholder agreement that will be the basis of how the corporation will be operational moving forward.

The key to a successful shareholder agreement is the legal clarity of the document. You do not want any areas open for “interpretation”. It is in the everyone’s best interests to have an explicit explanation which is legally clear and not ambiguous. To do this, it is best to contact an experienced North Shore commercial lawyer who can draw up the shareholder agreements. North Shore companies will derive great benefit over the long haul by undertaking this simple task. One of the biggest law firms in the area is McVeagh Fleming and Co who have a team of business, contract and corporate lawyers who can help.

Of course shareholder agreements can be changed and altered as the case may be, but only with the agreement of all parties in order to keep the original integrity in place as first intended.

http://www.mcveaghfleming.co.nz

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Have a Lawyer to Draw Up a Contract So That It Is Legally Enforceable

Business woman and client

Business woman and client

A business needs to operate within the confines of the laws that are applicable in the North Shore area. This requires owners and managers to be constantly aware of commercial laws, which can be quite complex in their application to situations that businesses may find themselves in.  Unfortunately a recurring problem for many businesses is customers not paying their bills on time. To ensure you are paid by your customers, get legally enforceable terms of trade from a North Shore commercial lawyer.

 

In every business, there is a need to fulfil certain obligations which they will pay suppliers for. This often requires contracts and other documents to be signed between the two parties, which can be legally enforceable, in case of any dispute. This is where it becomes necessary for a business to have a lawyer familiar with commercial law, to draw up such contracts and the terms of trade under which the contract will operate. Business deals do involve negotiation and agreements to be arrived at, and even though it is necessary to have trust and confidence in each other, it is always safer to have everything that has been negotiated or agreed to be set down in a legally enforceable document in the form of a contract, that can be signed by both parties involved.

Brandon Cullen - Albany Commercial lawyer

Brandon Cullen – Albany Commercial lawyer

Before any contract is drawn up, all the terms that look after the interest of both parties need to be set out and itemised. These contracts can be with customers, vendors, employees, investors or any other party that has a business relationship. A lawyer may couch contracts in legalese, but it is always better to cut out all the legal mumbo jumbo and ensure that a contract has language that a layman can understand. This makes it easy for the parties, who are ultimately responsible for the execution of the contract to be clear as to their responsibilities and obligations, which will be based on any negotiations or terms agreed to.

A lawyer drawing up the terms for a contract has to ensure that the contract has conditions that both parties to it can fulfil and are authorized to do so. Parties and authorities responsible for execution of the contract must be very clearly specified, while the terms laid down in the contract must include all details agreed to in the negotiation. The trickiest part in most contracts are payment obligations and delivery commitments and these must be spelt out in complete detail, so that there is never any ambiguity in to what each party has to do , to complete their part of the contract.

When contracts are drawn up, a good lawyer will also include conditions that can lead to termination of the contract. Under good business conditions and in 99 percent of the cases, these may be redundant, but once these terms are a part of the contract, it becomes a way for any dissatisfaction on either site to be brought to a culmination. It can also help to have terms that will allow for dispute resolution, legal costs and other issues that may become a bone for contention.

If you operate business in Albany or on the, a highly experienced North Shore commercial lawyer is McVeagh Fleming and Co.  If you need to draw up a trading contract or terms of trade, then be sure to contact McVeagh Fleming.

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Considerations When Leasing Commercial Property

Deciding to move your business to a different locationInside A Modern Office can not only cause a disruption to your business but it can also be a huge expense that cuts into your bottom line.

However, if the current location of your business is not up to par or it may be too small, moving your business can help to increase your employee’s productivity, raise their morale and make your business more profitable. Before you decide to move your business, there are some factors that you should consider.

What Are Your Needs From A Commercial Lease Property?       

One of the first things that you will need to think about is your needs when you are considering leasing a new property for your business. Someone who is experienced with commercial leasing will be able to provide you with helpful insight with the entire process. A reputable commercial leasing agent will ask you a series of questions before he or she begins to show you commercial properties for lease. These questions will help you with issues that you may have not considered before.

Some of the questions they may ask are:

  • Does the space you currently occupy project a positive image to client?
  • Is your current location easy to access?
  • Could amenities such as a conference room, a loading area or additional car-parking help to make your business more productive and profitable?
  • Does your business need more exposure or a better location?
  • Are you using your current space efficiently or are you losing money on unused space?
  • What method do you use to determine how much space you need for your business?

When Is The Right Time To Move?

If it has been determined that you need to relocate your business, you should decide on the best time to do so. For most businesses, it is best that the owner begins searching for a new location six months before the current lease is set to expire. This will provide the owner enough time to scout various options, find a suitable location and complete the improvements that are necessary. Six months is also enough time to give notice to the landlord.

If your business has somewhat unusual requirements then you might want to allow more than six months for the job.

What Is The Current Commercial Leasing Market Like?

The next thing that a business owner will need to do is take a look at the market. Although you can do this on your own, it is best to hire a commercial leasing agent who can help with this process. You should also be aware that many of the best properties that are on the market are not listed, nor do they have a “for lease” sign hanging outside of the property. However, a leasing agent who has knowledge of the market will know the properties that will be available before the information becomes public knowledge.

Another advantage that a leasing agent provides is that they can level the playing field in your favor. They will be able to give you information that is not known by the general public.

Finally, you will have a main contact person who you will work on your behalf while you are busy focusing on other areas of your business.

Negotiate the Leasing Deal

The final step is not the move, but the negotiation process. It would be in your best interest to be focused on at least two properties. This way if negotiations fall through with one property, you can start working on the other property. This strategy will prevent you from placing all of your eggs in one basket.

When a tenant is represented by a reliable commercial leasing agent, the tenant will gain significant information about the market. This will allow the tenant to secure a space that will provide them with favorable market conditions.

Talk To Your Lawyer Before You Sign the Lease

For most people, negotiating a commercial lease is a rare activity and Senior Business Manso they do not fully understand the legal requirements or commitments they might be making. It is vital to remember that a lease is a legal binding agreement and so they landlord can enforce the terms of that lease. A lease will often have personal claims against the business owner or the Directors of a business if the tenant fails to make payments. A commercial lease is generally much stronger and more punitive than a residential lease on a home. So, to prevent any shocks and to fully understand what you are committing to with the new lease for your office, warehouse, retail outlet or any other commercial premises, you must get advice from your lawyer first.

Often a contract or commercial lawyer will be able to point out areas that you can negotiate with the landlord or through the letting agent. Some lawyers will even carry out the negotiation on your behalf.

There is more information here about commercial lawyers on the North Shore. They are McVeagh Fleming lawyers for private and commercial work.

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How a commercial lawyer can help people buying a business on Auckland’s North Shore

Buying a business is a complex matter and one which can take a number of months to complete.

There are a lot of different activities that need to be borne in mind before you become the legal owner. This article will be a short review of some of those; it is not legal advice so please consult a commercial lawyer on the North Shore before you commit to anything.Woman in suit

Firstly, there are two finance aspects to address – the funding of the purchase and more importantly, the due diligence to make sure you are buying a business at a fair price.

Funding the purchase

Clearly any buyer of a business must have suitable funds available for settlement date of the transaction. Without sufficient finance the deal will not go through.

This will often cost the potential purchase the loss of any deposit, significant legal and financing fees for work done to that date. It will also cause significant damage to your reputation.

That said, there are many ways to fund a business purchase. Using your own cash is one but that is often not a good use of your assets. You can raise finance using other assets as collateral. This is very common with a family home typically used as the collateral. This obviously has some risks for your family in case anything goes wrong with the business.

Another method is to use vendor-financing where the seller agrees stepped payments which you can fund from cash-flow in the business.

Whatever, arraignment you agree with the vendor, you must have it clearly recorded as part of the legal sale transfer. Your commercial lawyer will put this in place for you.

Due diligence

Your accountant will conduct the financial due diligence which verifies that the accounts are correct, that taxes are up-to-date and a range of other financial measures are correct.

A commercial lawyer will check that the vendor is legally able to sell the business, that they are the true owner.

Contracts for buying a business

For the sale of most small businesses in New Zealand, the standard real estate Sale and Purchase agreement is used. This means there are no nasty clauses in the main body of the contract plus it saves you money on having the contract drawn up.

However, you or the vendor will be at liberty to add other clauses which your commercial lawyer deems appropriate. A good North Shore commercial lawyer on the will advise adding these clauses dependent upon the type of business you are buying.

This can include a verified stock valuation, a list of goods and chattels plus details of any machinery you are buying.

Other tasks a commercial lawyer will perform

For many businesses leases may be involved. These can be for premises, vehicles and large pieces of plant or machinery. All of those leases will need to be formally transferred to you as the new owner of the business. Your lawyer will verify that the leases are correct and that you understand your commitments b agreeing to them.

Sometimes they may be able to renegotiate parts of your leases. This is quite common for leases for business premises.

Conclusion

This is a brief overview of a few of the major issues if you are considering buying a business on the North Shore. Commercial lawyers will be able to help you understand these issues as they affect you directly. And they will also be able to carry-out those transactions for you. So be sure to contact a commercial lawyer as soon as possible and definitely before you sign any documents.