Buying and Selling a Business
If you are thinking about purchasing or selling your business, it is essential to work closely with a business lawyer to ensure a timely and smooth transaction and avoid disappointment or possible financial loss.
By applying a step-by-step approach we can guide you through the legal procedures of buying and/or selling a business and can take care of the preparation of contracts of sale, licenses and permits with your interest at the forefront to give you peace of mind.
- Review of Sales of Business Contracts
- Preparation of Contract of Sale
- Identify Appropriate Business Structure
- Preparing of Partnership and Shareholder Agreements
- Review of Franchise Agreements
- Transfer of Commercial Lease
Get advice from a Business Lawyer
Frequently Asked Questions
What is a Shareholder’s Agreement, and do I need one?
When running a business, it is important to understand the obligations and entitlements of all of the business owners. A Shareholder’s Agreement sets out what each shareholder’s rights and obligations are, both to each other and also the company.
It will detail what is expected when things are going well, but also what will occur when one party wishes to exit the business or where there is a dispute amongst the owners. Without a Shareholder’s Agreement, it is difficult to establish these issues, and will make any future sale or dispute more complicated and more expensive to resolve.
Is GST applicable to the purchase of a Business?
Where a sale of a business reflects a sale of a Going Concern, then there will be an exemption available to payment of Goods and Services Tax (GST) with respect to the sale.
A Going Concern will exist where all elements necessary to continue to run the business are being sold and transferred in the sale transaction. Whilst on a broad brush this appears straight forward, it is often during the negotiation of the business sale that elements of the business are negotiated to be retained or are proposed to be excluded in order to reduce the sale price or make the transaction simpler.
However it is important from the outset in a sale of business to establish what the transaction will include, and whether it will be an ongoing concern. This not only provides certainty to the parties regarding the funds necessary to settle the sale, but also ensures that proposed short cuts in the transaction do not have adverse impacts for either the owner or the purchaser of the business come settlement.
Section 52 Statement: What is it, and do I need one?
A Section 52 Statement is a financial summary of a small business, completed by the business owner’s accountant.
In effect, this provides a potential purchaser with oversight and disclosure regarding the financial performance of the business over a two year period. It is required to be completed for the sale of a small business, being a business being sold for $450,000 or less. It creates a starting point for the purchaser, and the purchaser’s accountant, to review the performance of the business as against the financial records of that business, and to assist in determining the suitability of the proposed purchase price.
Certain issues arise where a section 52 statement is not provided in relation to a sale of a small business, or where the timing of its production is delayed. These include the avoidance of the contract by a purchaser, the reclaiming of all funds paid by a purchaser under the contract, as well as personal liability by way of a fine.
Consent of the Landlord to the Transfer of Lease
During a sale of a business a landlord will often be approached to consent to the transfer of the lease from the current business owner to the purchaser of the business.
It is important that the landlord understands their rights and obligations in relation to any proposed transfer, and seeks legal advice throughout the process. The costs of that advice can be on-charged to the current tenant under both a retail and a commercial lease.
Where the lease is a retail lease, there are limited circumstances under which the Landlord can withhold consent to a proposed transfer. These relate to the financial suitability of the proposed tenant or the failure of the proposed tenant to agree to reasonable assignment provisions. However as a Landlord of a retail lease, care must be taken to deal with any request for a transfer of lease in a timely manner, as there exists deeming provisions where no response has been received within a specified timeframe. Further, care must be taken to review the proposed transfer as against any current breaches of the leasing arrangements.
Where the lease is a commercial lease, the requirements of any proposed transfer will be set out within that document. Care must be taken to ensure that these provisions are followed and satisfied, in order to ensure the timely transfer of any lease.