When it comes time to sell your business you want to ensure that you get a good offer and that the sale goes through smoothly. You do not want your business to be one of the many of thousands of businesses that do not sell or sell for considerably less that you had hoped.
Working with professionals that are experienced in business sales will help but as the Seller you have a huge part to play in the successful sale of your business.
Understanding the process and what is involved is crucial to achieving a successful business sale.
There are essentially 3 MAIN STAGES OF SELLING A BUSINESS …
Understanding what needs to happen in each of these 3 stages and being well prepared before you embark on each stage will help to ensure a successful business sale.
This article deals with Stage 3 – settlement of the sale …
STAGE 3 – SETTLEMENT
Once your the business sale agreement goes unconditional (for example, the Landlord consents to the transfer of lease to the Buyer and/or the Buyer obtains finance approval) there is usually a period of say 21 days to get ready for settlement of the sale of your business.
Your solicitor should have prepared and sent you a settlement checklist which will help you prepare for these events. These include the following:
Transferring the Lease
For any business operating out of a commercial premises, a significant part of preparing for settlement revolves around the lease
Often you will need to enter into a Deed of Assignment to effect the transfer. This is document which transfer the lease from you to the Buyer. You should make sure that you are released from all obligations to the Landlord arising after settlement.
Often Landlords will sign after settlement so it is important to get undertakings in this regard.
Business Name Business name(s) are transferred through ASIC Connect here is a link asicconnect.asic.gov.au.
You will need to give the Buyer a consent to transfer number at settlement.
Business Licences
If your business currently has certain licenses that it requires in order to operate, these will need to be transferred to the Buyer.
Transferring business licences can take a significant amount of time – so ensure that you allow sufficient time for the transfers to be processed.
Plant and Equipment
If you own your businesses plant and equipment then it’s unlikely that you’ll need to anything to effect the transfer of the plant and equipment. At settlement the equipment will automatically transfer to the Buyer.
On the other hand, if any equipment is leased or under a hire purchase agreement, you will need to contact the owner of the equipment to have the equipment transferred or otherwise paid-out. Often this equipment will also have a security registered against it at the PPSR and this security will therefore also need to be released.
Employees
Irrespective of whether it has been agreed that the employees will be terminated or transferred, Sellers need to ensure that:
- All employees have been properly notified of the upcoming business sale and whether the Buyer will be keeping them on;
- All employee entitlements that need to be paid out have been properly calculated; and
- The Buyer is fully aware of what employee entitlements each employee is owed (even if there are none).
Transferring Business Contracts
These are the agreements you have with third parties, for example suppliers and customers. These will need to be transferred to the Buyer or terminated.
Each business contract will have its own provisions setting out how it can be transferred. Note that transferring a business contract may have a notice obligation so it’s worthwhile commencing this process as soon as possible.
Settlement Statements
Settlement Adjustments will need to be agreed with the Buyer (e.g rental payments)
At the same time as sending over the settlement adjustments the Seller’s lawyers will give the Buyer payment directions as there may be different parties receiving payments.
Stocktake
If the purchase price includes stock then you won’t have to worry about conducting a stocktake.
If the purchase price does not include stock, then you’ll need calculate how much your stock is worth. This is generally done via a stocktake that takes place the day before settlement – you and the Buyer go through the stock and associated receipts and calculate how much stock there is.
There is nothing stopping you from simply agreeing with the Buyer to not conduct a stocktake and instead just sell them all your stock at an agreed price.
Settlement itself
At settlement the actual process of transferring ownership of the business will take place. If everything has been properly prepared, the only actions that will happen at settlement are the Buyer giving you the cheque for the purchase price and you handing over the keys to the business and any documentation that needs to be provided.
Now you can crack open the champagne!
If you need any assistance with your business sale or purchase, or with any other commercial legal issue please contact Helen Kay at helen.kay@riselegal.com.au or call 0402 318 033 for a free no obligation chat.
