FAQs about Company/Business Law

BUSINESS SALES TIPS

Staff & Company Documents

  • Get all your business and legal documents ready. This will make your position stronger when transferring your business.
  • Review all employment contracts
  • Ensure that your policies are in place i.e. Health & Safety, Equal Opportunities or Disability Policy
  • It is your responsibility to let everyone know within the company when the business transfer is completed.
  • Verify that all your commercial documents such as licenses, permits and contracts are up to date

Third Party Legal Contracts

  • In order to avoid delays, resolve any legal disputes before the transfer
  • Find out whether your existing contracts automatically transfer with the business or if they have to be re-assigned.
  • If there are any leases taken by the business:
  • check when they expire
  • whether there are any repairs to be made
  • what you need in order to re-assign them

Plant & Stock

  • If equipment is an important part of your business, ensure that it is repaired or replaced before the transfer as it may trigger price reduction and create bad impression for the buyer
  • Make an agreement with your buyer in relation to the value of the stock. If there is any disagreement, use a professional valuation.
  • Inform your buyer about your proposed stock value as soon as you can so that he can prepare the funds.

Finances

  • Consider how will you pay your creditors?
  • Debts sold as part of the business assets?
  • Assess your finances and take advice from your accountant regarding the mortgage settlements and repayment methods.

How can a shareholders’ dispute be avoided ?

In short, the best way to seek to avoid a dispute between shareholders is to have a clear, well considered shareholders’ agreement. Amongst other things, a good agreement will cover:

  • financing for the company
  • policies on dividends, directors’ fees and salaries
  • responsibility for different areas of the business
  • the company’s key objectives
  • necessary authority and procedures for shareholders to take certain actions such as borrowing or incurring costs
  • potential future issues such as death, sale of shares and other possibilities.

What are the main issues that need to be agreed with a joint venture partner?

Issues to be considered include:

  • structure of  joint venture
  • joint venture objectives
  • management
  • finance
  • assets each party will contribute
  • who will work for the new venture
  • how profits will be shared
  • ownership of intellectual property created by the joint venture
  • dispute resolution, mediation or arbitration
  • exit route

Are shareholders free to transfer or sell their shares to someone else?

  • A company’s articles of association commonly allow the directors to refuse to register any transfer of a share submitted to the company.
  • However, they may include other, different restrictions on the transfer of shares. For example, they might require any shareholder who wants to sell shares to offer them to existing shareholders first, which is known as pre-emption, or to offer them back to the company through a share buy-back. The articles might also establish how the price for the shares is to be calculated in each case.
  • Alternatively, they might provide that shares can be transferred freely between members of the same family, but any other transfers are subject to the usual directors’ powers to refuse to register a transfer, or to pre-emption rights in favour of existing members or the company (with a mechanism for establishing the price to be paid for the shares) mentioned above.

What now ?