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Buying a Business or Company

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Buying a business/Company

A company is typically bought by purchasing the shares (share purchase) or the essential assets of the company (asset purchase).

In a process of buying a business it is essential to get every stage of the process right in order to achieve a positive result.

1. During the initial stage the buyer is usually required to sign a confidentiality (non-disclosure) agreement with the buyer and agree not to disclose any information about the target business.

2. Then a non-binding agreement setting out the main terms of deal is drafted. It is often called the “Heads of terms” or a “Letter of intent” and is usually prepared by the buyer. This agreement normally the structure of the deal.

3. Next part of the preparation process is conducting due diligence of the target business. This is one of the crucial parts of the process. Doing through due diligence will equip the buyer with knowledge needed to make an informed decision regarding the purchase. It is key to get the financial statements, establish the ownership of the company property, equipment and other assets, to ensure that there is no litigation process against the company, to examine the current contractual obligations, including employment contracts. It is important to make sure not to enter into legally binding deal with the other party before the due diligence is completed.

4. The buyer should look out for provisions obliging him to keep on the target employees on their existing terms.

5. Intellectual property rights are often the most valuable part of the business. Consequently, it is important to ascertain who owns the intellectual property, whether it is sufficiently protected and the terms of the transfer of the rights.

6. Another issue to consider is whether the transaction needs approval of the competition authorities. The deal might also require approval of the buyer’s or the seller’s shareholders.

7. On a basis of the issues discovered in the process of due diligence the buyer might refuse to proceed with the negotiations or ask for a reduced price.

8. If the buyer decides to proceed with the deal, the acquisition agreement have to be composed. Special attention needs to be paid to the contractual warranties made by the seller. Warranties are promises made with regards to different aspects of the business which, if breached, give a right to damages. A disclosure letter is another important part of the agreement. A warranty claim cannot be made regarding any issue disclosed in that letter.

9. A final part of the transaction would be the signing of the contract and competition of the acquisition.

10. It is important to immediately seek professional advice in case of any post-completion complications in order to not exceed the time limits for the compensation claims from the seller.

It is advisable to seek professional legal advice when buying a business in order to clearly understand your legal responsibilities and protect your business from the possible liabilities that might arise.

Come and see on of our expert commercial solicitors during our Small Business Advice Clinic held every Tuesday between 9 am and 10 am in our Manchester office – booking details can be accessed from our events page.

Should you need urgent advise on setting up a business or commercial contracts contact our specialist corporate solicitors or commercial contracts solicitors solicitors in Manchester on 0161 820 8888 and solicitors in London on 0208 889 8888 for immediate assistance.

We specialise in commercial and business law and are dedicated to ensuring that our clients are well informed. We will advise you of the law, your duties and rights and how it applies to you practically in a straightforward and professional manner.

Don’t wait until it is too late.

Call our business sales & business purchases solicitors on 0161 820 8888 for a corporate solicitor in Manchester or 0208 889 8888 for a corporate solicitor in London.

We will happily provide a free 30-minute consultation on your matter. Give us a call today!

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