Buying and Selling a Business or Company Solicitors

Buying or selling a business is a huge decision and a transaction of this kind will involve a significant transfer of funds. Obtaining legal support is crucial to ensure that your interests are protected, and everything goes smoothly. 

How does buying and selling a business work? 

There are two main ways to buy and sell a business:

1. Asset sale: the buyer takes over the business by acquiring assets and liabilities which they can be selective over. This tends to be preferable to buyers because they take on fewer risks, but this is not ideal for the seller meaning most liabilities will remain after the sale. However sometimes, if tax reliefs are available, it softens the blow. In this situation the business cannot continue as normal, and may be re-structured.
2. Share sale: The buyer acquires the shares which own the assets and liabilities of a business. This is simpler for the seller and it means the business can continue with ‘business as usual’. It does mean the buyer will take on more risks.

What does a solicitor do when selling a business?

A commercial solicitor plays a crucial role in facilitating the sale of a business. Their duties include: 

• Carrying out due diligence: combing through the buyers’ background to flag any potential legal issues
• Legal advice: a commercial solicitor can advise on things like non-disclosure agreements and employment rights.
• Contract drafting: create a watertight framework to avoid future disputes.

What does a solicitor do when buying a business?

Similarly to a solicitor employed by someone selling a business, a solicitor employed by a buyer of a business is crucial to the success of the transaction. A solicitor will be responsible for:

• Due diligence: checking through business records for any risks to the buyer of the business if they go ahead.
• Negotiation: liaising with the seller’s solicitors to ensure the buyers financial interests are taken care of.
• Managing the transfer of funds

How long does it take to buy or sell a business?

The general consensus is that the sale of a business from the seller’s point of view is 6 to 12 months beginning with finding a buyer. The preparation process is, however, much longer. This begins with the seller preparing to sell the business by gathering all the important paperwork and making improvements to the business to make it more desirable. 

Each party then carries out due diligence and negotiates on a price and what will be included. This can take days, weeks or months, though the individual circumstances of each case will influence how long it takes. 

What documents will I need for buying and selling a business? 

When preparing to sell the business, the seller should gather the following business documents for potential buyers to look at:

• Information about shareholders
• Contracts and agreements with suppliers
• Tax returns
• Information about any property lease 
• Employee contracts 

Once you have a buyer, the following documents will be involved in the sale:

Heads of Agreement: this is not necessarily a legally binding document but rather a draft of the terms of the sale to demonstrate the intention of the parties including the proposed sale price and intended date of the sale.

Confidentiality Agreement: to protect the reputations of the parties and prevent any sensitive business information from being passed on.

Business Sale Agreement: this is a legally binding document which sets out the exact terms of the sale which the parties have agreed upon. This includes the exact sale price, what will be included in the sale, and the date of completion. 

How can Merriman Solicitors (incorporating AB Family Law) help?

At Merriman Solicitors (incorporating AB Family Law), we understand that when selling or buying a business or company, the stakes are incredibly high, with large amounts of capital on the line and the livelihoods of employees relying on the process being smooth. We provide the support required and pride ourselves on our expertise. Our qualified commercial solicitors have many years of experience in managing the purchase and sale of businesses smoothly and efficiently. Should you wish to find out more about how we can help, please get in contact with our team to arrange a call or meeting, or visit one of our branches: Marlborough, Chippenham or Gloucester.