Tebbitts & Co specialise in buying and selling businesses. Over the last 12 months we have acted in transactions involving education training business, motor engineering businesses, cafes and shops, dental practices and many more…
Buying and selling a business can often be a long and complex process. If you are buying a business you will need to think about whether to trade in your own name or as a Ltd company.
You may be considering entering a partnership. Choose your partner carefully though because joint ownership means joint and several liability.
A Ltd company is often a target business. There are many risks to buying a Ltd company. Due diligence needs to be carried out and thought given to the best approach. Relationships with shareholders need to be considered.
Share purchase or asset purchase
For the buyer an asset purchase is often preferred over a share purchase of a Ltd company. This is because the assets and liabilities to be purchased can be identified in the asset purchase agreement. Any other assets and liabilities will remain with the seller.
With a share sale the purchaser buys the entire entity including all assets, liabilities and obligations whether these are brought to the buyer’s attention or not. Following completion the buyer is responsible for the whole company.
Sellers often prefer share sales as they can divest themselves of the whole company including its liabilities.
It is often appropriate to consider establishing a confidentiality agreement or non disclosure agreement between buyer and seller at the outset of negotiations. This should set out clearly a sound definition of confidential information and the consequences of breach.
The confidential information can relate to projects, staff, financial data or a subject that needs to be discussed freely under the protection that can be provided by a well drafted agreement.
Warranties and Indemnities
A warranty is a contractual statement by a seller about an element of its business. Warranties if breached, should give rise to the remedy of damages. Indemnities are different as they amount to a promise to reimburse a purchaser in repect of a specific liability.
Sellers will seek to restrict warranties whilst buyers seek to broaden the extent of legal protection afforded by warranties.
Indemnities are sometimes required in relation to specific known risks relating to a transfer of a business.
When a business is sold the purchaser often wishes to ensure that the sellers will not set up in competition.
We can explain more about the different types of restrictive covenants and their enforceability.
Without restrictive covenants a purchaser of a business is at greater risk of finding that their newly bought business is devalued by competition from a seller, disclosure of data or loss of key staff.
The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) are designed to protect staff whose employer is subject to a change of ownership.
TUPE does not apply to transfer by share sale.
The issues can be complex which is why Tebbitts & Co are here to help.
When buying or selling a business you need to be aware of the implications including transfer of undertakings laws, copyright licences, leases, liabilities, contracts and other issues.
We have experience with all types of businesses including brewers, nurseries, care homes, hotels, pubs, manufacturers, insurance firms, agencies, builders, retailers, franchises, accountants, surveyors, call centres and IT companies.