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October 6, 2016
Making Arrangements for the Sale of a Business

Selling a business of any size or structure is a complex and time-intensive process that should be well documented to ensure the interests of both the seller and buyer are protected.

A Sale of Business Agreement or Business Sale Agreement is central to establishing the terms of sale for the mutual benefit of the parties involved.

By signing this document, the seller and buyer enter into a legally binding contract, reducing the risk of there being subsequent disputes in relation to the transfer of the assets to the new owner.

As an additional advantage, the tax (CGT and GST) and duty consequences associated with the trade may also be minimised.

Negotiating the Sale of Your Business

Whatever your reasons might be for selling, you will need to perform a thorough evaluation of your operation to ensure the information you provide to prospective buyers is true and accurate.

Be aware that if anything you communicate in the course of advertising, negotiating or finalising the sale of your business is later found to be untrue, it could be construed as deceptive or misleading behaviour.

Typically, the parties will need to agree on a number of things, such as:

The sale price

The deposit amount (usually 10 percent of the sale price)

The settlement period

Arrangements for existing staff

Handover training for the buyer (if any)

These particular talking points should be areas of focus during negotiations. That said, you may need to compromise on your position on some things in order to secure an outcome that is acceptable to all.

As an example, you may wish to lower the sale price – and therefore the deposit amount – to encourage and facilitate a quicker settlement.

Elements of a Sale of Business Agreement

In Western Australia, an intermediary can draw up a Sale of Business Agreement but there are a number of advantages to retaining the services of an experienced solicitor.

Most of the time, the buyer will have a solicitor review the agreement for potentially misleading or false statements and check that all aspects of the sale are addressed.

Generally, a Business Sales Agreement should look to cover:

All assets being sold: Including property, fixtures and fittings, equipment, goodwill, rights over trademarks, business names or patents, other intellectual property, etc.

All relevant liabilities: Including wages, holiday pay, superannuation, long service, any outstanding amounts owed to creditors or owed on the balance of any lease agreements, etc.

Employee entitlements: Including whether employees are considered as part of the sale and to be transferred along with ownership.

Restrictions on trading: Preventing the seller from carrying on a new operation in the same industry and competing against the new owner.

Procedures should any issues arise: Statements about what will happen if the buyer walks away, if inaccuracies are found in the contract, etc.

Next Steps…

If you’ve done your research and have decided to sell your business but require help preparing your business for sale, contact David Lewis, Partner at LBH on dlewis@lbandh.com.au.

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