Selling a Business

If you are selling a business it is essential to take legal advice to ensure that the terms on which you intend to sell are incorporated into a binding legal agreement and in particular to ensure that you are not required to pay back any of the purchase price in the future.

There are two methods by which you can sell your business. You can sell the assets of a business (asset sale) or sell the shares in the company that owns the business (share sale). The two are fundamentally different. If you undertake a share sale, you sell the company with all its assets and liabilities. If you undertake an asset sale, you just sell specifically identified assets and assign responsibility for specifically identified liabilities.

You will be required to provide detailed information to the buyer about all of the aspects of the business and it strengths and weaknesses. This information gathering process is known as a legal due diligence exercise and is generally intended to be for the buyer's benefit, but it can also be used for the seller's benefit as part of the disclosure process.

The sale agreement will document the terms on which the business will be sold. It is usual for the bulk of the remainder of this document to be devoted to warranties and indemnities.

Warranties and indemnities are methods by which the buyer can seek to recover losses that it has suffered as a result of the acquisition of the business from the seller. The warranties take the form of a series of statements about the business that the seller 'warrants' as being correct. If it subsequently turns out that any of the warranted statements is incorrect, then the buyer may be able to make a claim to recover any loss in value that it has suffered as a result of such incorrect statement.

For further information, please contact Simon Dakin or one of the team on 0115 9 100 200 or email enquiries@actons.co.uk.