The Process of Selling a Business

In the majority of cases businesses seek assistance from a lawyers once a purchaser has been located and some of the terms of the sale, such as the purchase price and settlement date, have been agreed to.

Depending on your particular business or industry, it may be wise for the first contact with the lawyer not to be after the point in which the parties have agreed on price, but at the commencement of negotiations. This is so as it is advisable to require the purchasers to sign a confidentiality agreement prior to negotiations. By making this the first step in the selling process your business is protected from the purchaser obtaining and using valuable business assets without paying for them, such as staff, business methods and client lists.

The next stage in the selling process will depend on the complexity of the sale. More complex business arrangements may require a heads of agreement to be drafted to ensure the fundamental terms between the parties are legally binding.

With or without heads of agreement it is usual for the vendor’s lawyer to draft the contract for sale of business with negotiations between the parties culminating on an exchange of contracts, meaning that each respective party exchanges the final signed version of the contract with each other. To bind the agreement a deposit is paid, and depending on the terms of the agreement is held by the business broker, lawyer, or released immediately.

Once the contract has been executed, you will need to prepare for the sale. This may include some or all of the following steps:

• Organising discharge of mortgages or charges on the company/assets;

• Organising transfer of contracts such as phones, electricity, advertisements;

• Organising change of business name/ company name;

• Drafting a license for the purchaser to use your IP (if not being transferred);

• Transfer or abolishing licenses;

• Transfer or Assignment of lease premises.

If you are considering selling your business or already have a buyer ready to proceed, we invite you to contact your nearest office to get in touch with one of our business lawyers.

We have business lawyers located at Sydney, Chatswood, Sutherland and Wollongong.