Before you consider selling your business, there are a number of issues you should consider and seek financial and legal advice in regards to such issues including:
- What exactly are you selling? For example, are the assets to be sold separately?
- Is the business a going concern (GST implications)?
- Is the goodwill of the business for sale?
- What information will be provided to the prospective buyer? For example, accounting records and the accuracy of Statements made by or on behalf of the seller to entice the buyer
- Can the buyer continue to run the business successfully during any transition period following the purchase? For example, training the purchaser and introducing the purchaser to established customers
- Are the financial records of the business up-to-date / organised etc.?
- Is the business operating out of leased premises and if so, will the landlord agree to the transfer of the Lease?
- What are the tax implications on the sale of the business including GST, Capital Gains Tax, the value of stock, rollover relief etc.?
- What are the business’ market and nature of competition?
- Employees – is it intended that the prospective buyer will take over each of the employees’ entitlements or alternatively are all or some of the employee contracts to be terminated on the completion date?
- What is to happen with any supply contract – are they to be assigned or terminated?
Whilst understandably the seller of every business wants the sale process to be over as soon as possible, selling a business is one of the largest financial transactions anyone can make. Therefore, it is imperative that you seek professional advice from your accountant and lawyer and have the terms and conditions of the sale documented properly.
An important term and condition to properly consider is a Restraint of Trade Clause – this clause has the effect of restricting the seller from competing with the buyer for a certain period of time in a certain geographical area, to be negotiated between the parties. These types of clauses have been brought before the courts on many occasions. Generally, courts are loathe to enforce provisions which stop a person from earning a living, especially if it is for a lengthy period of time or in a large geographical area and therefore depending on the facts and circumstances relating to the sale and more specifically the Restraint of Trade Clause, the courts may strike out such clauses.
Contact us to find out more or to arrange a consultation with an experienced business and commercial lawyer in Sydney.