Purchasing a Business
Posted on 26 Apr 2019
If you are looking to purchase a business (asset purchase), it is quite possible that you are wondering how the process works. We regularly assist clients with buying businesses which can range from hotels, salons, tea rooms and retail shops. The main steps of the transaction are outlined below.
- Preliminary Agreements
In some circumstances the parties enter into a confidentiality agreement before they receive any information of a confidential nature and/or an exclusivity agreement to agree a set period of exclusivity.
- Heads of Terms
We are normally provided with Heads of Terms from the acting agent (if there is one). Alternatively, some clients have negotiated directly, and we are provided with key terms which have been agreed between the parties. This provides us with an overview of the transaction and helps us provide you with a clear indication of the legal costs involved. Wherever possible we try to provide a fixed fee quote at the outset of the matter.
- Tax considerations
An asset sale typically consists of numerous assets such as property, stock, plant, machinery and goodwill. The purchase price is apportioned, and it is important to work closely with the accountants to agree the apportionment due to the various tax implications.
- Due diligence
You as the buyer will want to ensure that you find out as much about the business as possible. We assist you with this by preparing a legal due diligence questionnaire covering issues such as property, data protection, employment and pensions. This questionnaire is then completed by the seller and the relevant advisers. If there is property included, we will conduct the usual searches and enquiries in respect of the property that we would ordinarily carry out in a conveyancing transaction.
We will be identifying whether TUPE 2006 (Transfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246) applies and advising on the obligations under TUPE 2006. Generally speaking TUPE 2006 means that all employees automatically transfer to the transferee together with their contracts of employment.
- The Asset Purchase Agreement
This is the formal written agreement which will be entered into by the parties covering all aspects of the purchase of the business, including the parties, the assets, the property, conditions to completion, employees, liabilities, debts, warranties, limitations and restrictions on the seller. This will be bespoke and will be negotiated between the solicitors acting and amended accordingly.
The seller’s solicitor will prepare a disclosure letter. This will usually include specific disclosures (for example if the seller is aware of something such as an employment law claim).
- Completion matters
Formally completing the purchase, completion of any assignments or transfers and any necessary consents. The funds are transferred via the solicitors.
- Post completion
Dealing with the payment of stamp duty land tax and filing returns. The application to the Land Registry to register the buyer’s title to the property. Serving notices of assignment, underletting and charges to the landlord (as appropriate).
Further News - The impact of the General Data Protection Regulation (GDPR) when selling your business »