The purchase or sale of a business is an exciting prospect for both buyers and sellers. As a buyer, you may be looking to gain entry into the commercial market, or to add to an already existing enterprise. Alternatively, as a seller, you may be looking for a return following many years of investment in developing a successful business. Yet regardless as to whether you are considering purchasing or selling a business, you should think carefully on your motivation and what steps need to be taken to ensure that a sensible bargain is struck.

At NA Legal, we have vast expertise in assisting clients to organise, process and finalise business transfers. The sale or purchase of any asset is important, but that of a business can be particularly complex considering the different issues that will need to be addressed to ensure a smooth transaction. If you are considering buying or selling a business and looking for expert legal advice, NA Legal may be able to help you.

Specialist Business Transfer Legal Advice 

For many, the sale or purchase of a business is thought of as a largely simple process: parties agree a price for the business and sign documentation to facilitate the transfer. In reality, a business transfer is a contractual arrangement for a special kind of product – a business. This business will have distinctive features: a customer base, a unique place in the market, varying commercial potential, specific assets and liabilities, amongst many other things.

As such, legal advice can be very important in helping to ensure two things:

1. Certainty – you must be very clear on what you are buying/ selling via a meticulous process of due diligence, and this should then be accurately reflected in any legal documentation; and
2. Safety – no matter whether you are purchasing or selling a business, there will be a transfer of business liabilities. This must be done with the utmost care, to ensure both parties are not unnecessarily, or unexpectedly, exposed.

How is a business sale or purchase organised?

It is very important that you are clear on why you are buying or selling a business. This will allow you to assess whether it is a good time to pursue the transaction and that, depending on the state of the market, you are likely to be able to strike a good bargain.

In terms of the legalities of how a business transfer is carried out, much will depend on the kind of transfer you are likely to pursue. In law, it is possible for one of two kinds of transfer to take place:

• Where a business is operated by a sole trader or some kind of partnership, the business will normally be transferred by way of an asset purchase/sale. This means that each of the constituent parts of a business will pass in ownership from one party to another.
• Alternatively, where a business is owned by a company there is the option of pursuing a share purchase/sale. This is different from an asset transfer, in that individual shareholders will be transferring their interest in the business in exchange for financial reward.

In large part, both of these types of transfer operate along the same principles. Whether one type of transfer is more preferable than the other will depend on the business and your particular circumstances.

While the kind of business will tend to dictate the kind of transfer that will take place, you should think carefully on your motivation for pursuing a business purchase or sale and take advice on how to realise this. An important point to highlight is that while both of these processes are similar, asset and share transfers do have differences and you should agree which process you want to pursue as early as possible. This will have consequences for the structure of the deal, and may also affect the price that is likely to be negotiated for the transfer.

Regardless as to the means of purchasing or selling a business, there are certain key steps that should be undertaken to ensure the deal can be finalised as quickly as possible.

Legal Advice for Selling a Business

Sellers have a great deal of work to do in preparing their business for sale. You must understand that any buyer will be interested to know the condition of the business before they are likely to enter into any negotiations with you. This means that you need to get things in order, and should prepare information setting out the details of the company. This will include highlighting:

• Employees in the business and the terms of their employment, if they are going to be part of the transfer;
• Property interests that the business has, and information highlighting the ownership (if any) that the business has in that property;
• Finance agreements that the business has in place; and
• Any issues that are likely to affect the attractiveness of the sale, e.g. potential liabilities such as pending or expected litigation against the business.

Legal Advice for Buying a Business

Buyers should conduct a thorough examination of any business that they are considering purchasing. Ultimately, the level of detailed investigation into the condition of the business will depend on whether the purchase involves the transfer of assets or shares. However, you should be very clear on what exactly you are paying for. This is sometimes referred to as ‘due diligence’ and can be very complex, depending on how sophisticated the business is that you are interested in. This will involve a review of all of the information provided by the seller as part of the transfer, it may also involve additional investigations depending on the quality of the seller’s information.

Specific issues that buyers should concentrate on (though not dissimilar to those that the seller will provide information about) include:

• Property – where a business transfer includes any property, you should get some comfort that the seller is capable of passing the property to you. Alternatively, if the property is subject to a lease, you will want to find out if it can be assigned to you;
• Financial liabilities – Business need finances to survive. You should seek clarity in the financial health of the business, and what obligations it owes prior to your taking over ownership;
• Intangible assets of the business – the value of many businesses is increasingly found in their intellectual property. You should ensure that any valuable IP is being transferred to you so you can exploit it to your advantage.

Business Transfers - Strike a good bargain

Ultimately, any purchase or sale of a business is a negotiation – the buyer will look to avoid any unnecessary expensive while a seller will attempt to maximise their return on time and money invested in the business. It is highly advisable that you work with a solicitor who is experienced in negotiating business transfers, and who will be able to ensure that all negotiations and agreements are accurately documented to avoid any ambiguity or uncertainty. Equally, an experienced commercial lawyer will be able to assist in preparing a business for sale to attract buyers, and in reviewing seller documentation to ensure that buyers are fully apprised of the condition of the enterprise and any issues which need to be addressed ahead of the transfer.

NA Legal is a law firm providing commercial, pragmatic advice to those who are interested in buying or selling their business, and have acted for clients – amongst many others - working in the hospitality and retail sector. We take our role as a legal advisor seriously, and will work with you to achieve a transfer that has been fully appraised and processed as quickly as possible. Our team take pride in working with you, and will structure the deal to ensure that it is not hampered by unnecessary delays. Contact us today and learn about you we can help you.