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The Selling Process Series - Completing the Sale & Life after Sale

View profile for Margaret Evans
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Selling your business is more than just signing a contract – at FDR Law our team of lawyers will be with you all the way explaining the process in non-legal jargon for you to easily understand.

Completion conversely begins with a Heads of Terms (also known as a Letter of Intent) letter with the buyer.

This legal document may be drawn up before a chosen bidder is granted a period of exclusivity to conduct due diligence or, in a race to Completion among competing bidders. When one is prepared to sign a document outlining what the buyer has agreed to purchase:

  • the payment structure,
  • who will pay the costs,
  • details of contracts and assets,
  • responsibilities to employees and a timetable for completing the purchase.

Usually, this document is not legally binding except for clauses covering exclusivity , if any, and confidentiality.

This Heads of Terms letter serves as a briefing document for your lawyer to draw up the Sale and Purchase Agreement in negotiation with the buyer’s legal team and other advisers.

This is rarely as straightforward as it might seem.

Both sides may have to make compromises before the Sale and Purchase Agreement is signed and you need to be confident that your advisers have ensured that the document does not contain any surprises about your future liabilities.

 At FDR Law our corporate legal experts are skilled and experience at navigating the minefield of corporate transactions and will work closely with you throughout to minimise your risk.

As part of the legal documentation, you will be required to complete a number of additional documents, among which those with the most contentious potential are Warranties and Indemnities.

Warranties are legally binding and state that specific information you provided to the buyer is accurate, such as financial information and the ownership of assets. If you warrant that certain information is accurate and it proves not to be, the buyer may take legal action against you.

However, our experienced lawyers can help you to produce a Disclosure Letter, with the assistance of your other professional advisers, which will help to protect you against potential litigation after the ink has dried. If, for example, there are no outstanding employee disputes but a member of staff has threatened you with action, you should disclose this with a full explanation.

You may also have to agree to Indemnities – these are promises to reimburse the buyer if a liability incurred during your ownership emerges in the future, such as a tax penalty incurred but not imposed during your ownership of the business.

Take great care over the wording and extent of the Warranties and Indemnities. Make sure the Disclosure Letter has been drafted to limit your liabilities and the time period for which they apply.

Legal documents can be tedious at the best of times but resist the temptation to nod them through towards the end of a wearying process. Make sure you have read them thoroughly and fully understand your liabilities and your protection.

At FDR Law our corporate team will take the burden from you and assist you through this process. 

Completion Meeting 

Although the deal should be agreed by this point, there may be a few remaining issues to be resolved in a Completion meeting. If major issues arise, then the process has been flawed or one of the parties has not been acting in good faith.

You will need to ensure you are present with your advisers at this meeting (whether it is face to face or via skype, video conference or other electronic means).  This is the point of signing contracts.

The documents will, as a minimum, include:

  • the Sale and Purchase Agreement
  • a tax deed (which in a share purchase is your indemnity against unforeseen tax liabilities)
  • the Warranties
  • the Indemnities
  • the Disclosure Letter
  • Non-Compete agreements or Covenants, binding you not to set up a competing business in the same area for a specific time
  • Resignation letters from outgoing directors
  • PSC letters and notifications
  • Completion board minutes

The buyer’s solicitors register the change of ownership and directors at Companies House.

At the moment of signature, the deal is done.

What will you feel?

  • Tired; yes.
  • Relief that the process is at an end; almost certainly.
  • Jubilation that all your hard work, probably over years, has produced a good return on your original investment; perhaps less than you expected.
  • Regret that a major part of your life which you have cherished and developed is no longer yours; probably a little.
  • Excitement? Well, now you have the capital and the freedom to go and do it all again.

Even when the deal is done, what you do next could determine the overall success of your decision to sell.

Managing your money is just as crucial as maximising your sale price.

Most entrepreneurs have different concepts of what to do with the money once their business has been sold.

Although a glass of champagne may be a common theme in the immediate aftermath, ideas can be as diverse as:

  •  new business ventures,
  • an investment portfolio
  • or a round-the-world holiday,

This depends on how much the seller made and his or her stage of life, or thousands of other factors.

Very few sellers make enough from the sale to be wealthy for life, however, and deciding what to do with the money can be just as vital as maximising the amount you make from the sale.

With interest rates low it’s unlikely you will want to store your hard-earned money in a bank account for your savings to be outstripped by inflation, so what options are available to you? Ensuring you take good advice at this point can be a life-changing decision.

You may be considering reinvestment in a new venture, or shares or property; you may be looking to your pension and tax planning.

At FDR Law our journey ends with you on completion of your sale but we work closely with a number of professional advisors who can assist you in this next chapter.

Throughout this series we have looked at the issues and complexities that can arise when selling your business.

If you want any more information or if you are considering an exit strategy and want some legal advice and assistance then please contact our Head of Corporate, Margaret Evans, Margaret.evans@fdrlaw.co.uk or ring Margaret or another member of our commercial team on 01925 230 000 or visit the fdr website at fdrlaw.co.uk

**This article does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest. Specialist legal advice should always be sought in any particular case **