Business Sale
MERTON BUSINESS SALE SOLICITORS
Getting your business ready for sale
Before selling your business, you need to make sure your business is ready for the sale. You need to consider how you will structure the sale. This is dependent on the type of business you own. If, for example, you own a limited company, you have to decide whether it is just the assets you are going to sell or the shares as well.
Sales involving shares tend to make the transaction more complex as shares carry the liabilities of the company as well. In order to make sure he is not taking on more than he bargained for, the buyer will carry out “due diligence”, which involves making a detailed investigation of the business prior to signing any contract. More often than not, the buyer will also ask for indemnities and warranties from the shareholders to cover for any undisclosed liabilities.
Selling just the business’s assets makes the transaction, on the whole, simpler, although you should consider what you do to make the business a more attractive proposition. You might, for example, want to remove certain liabilities attached to the business by transferring the assets to a brand new company.
Tax considerations
Where possible, we recommend using a specialist tax solicitor and accountant to find ways to save money when selling your property.
In the majority of cases, it is possible to avoid VAT, so long as it can be shown that the business is a going concern and the assets are being transferred to the buyer and he intends to use them for the same kind of business the seller used them for. If the business is not used for a significant period of time during the transfer, then it might be difficult to show that you are selling a going concern.
If you are selling the shares, you will have to consider how you price those shares. As shares are subject to income tax, you will probably want to try and keep the share price as low as possible. However, in order to save taxes, the buyer will probably want more value apportioned to the shares, so this could prove to be a contentious issue when negotiating the sale.
Dealing with your employees
If you sell your business as a going concern, the rights of your employees will be protected under Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).
When selling a business, all of the employees’ employment right will be transferred from the seller to the buyer.
To achieve a sale, it may be necessary to make some redundancies, although like any employment matter, this must be approached carefully to avoid any disputes going to employment tribunals. If you can show that the employees were dismissed for ‘economic, technical or organisational’ reasons, the dismissals will not be unfair.
If possible, you should leave redundancies to the buyer as under the business model they have and/or any budgetary constraints, they are in a good position to show that the dismissal is for an ‘economic, technical or organisation’ reason.
If you must make redundancies, make sure that both your employees and any relevant trade unions are properly consulted at every step. Employment law is complex, so where possible use a solicitor to make sure you are on the right side of the law.