A Guide to Buying or Selling a Business in New Zealand:
Are you considering entering the world of buying or selling a business, but find yourself unsure of where to begin? This article aims to provide you with essential insights and assistance to help you navigate the complexities of buying or selling a business.
Whether you are the vendor or purchaser of a business, it is highly recommended to have a lawyer review the sale and purchase agreement before signing. Even if a business broker is involved, they often prepare this agreement on behalf of the vendor. At our firm, we can help draft the agreement for private transactions and ensure that your interests are protected. Our expertise lies in making sure you are aware of your obligations and negotiating terms that are advantageous to you and your business.
The sale and purchase agreement is a vital document that encompasses various crucial aspects of the transaction. It typically includes:
- Business Details: Clear identification of the assets being bought and sold, including specific inclusions or exclusions.
- Purchase Price Breakdown: Detailed breakdown of the purchase price, distinguishing between tangible and intangible assets as well as stock held.
- Vendor Warranties: Historical information provided by the vendor about the business, such as past turnover (excluding future projections).
- Vendor Undertakings: Commitments made by the vendor to assist with the handover process to the purchaser.
- Restraint of Trade on Vendor: Clauses preventing the vendor from engaging in competition with the purchaser after the sale.
- Lease Details (if applicable): In the case of leased premises, inclusion of lease specifics like rental terms, renewal and rent review dates.
- Conditions: Any conditions that need to be fulfilled, such as due diligence and finance arrangements.
Once the sale and purchase agreement is signed, our services extend beyond the agreement itself.
We can support you in the following areas:
- Due Diligence: Thoroughly examining the business, including scrutinizing the vendor’s contracts with suppliers and customers.
- Lease Assignment: Facilitating the transfer of the premises lease from the vendor to the purchaser.
- Resolving Encumbrances: Ensuring that any encumbrances, such as registered financing statements, are cleared before settlement to ensure clear title is passed from vendor to purchaser.
- Addressing Employee-Related Matters: Providing guidance on handling employment issues arising from the business transaction.
- Financial Settlement: Assisting in ensuring an accurate transfer of funds between the parties, accounting for adjustments to the purchase price, deposits, or any prepayments made by the vendor.
It is important to note that when considering a business purchase, you should exercise caution when contemplating the acquisition of existing shares in a company. While it may seem like a convenient option, this method carries inherent risks that should not be overlooked. Unlike purchasing the assets of a business, acquiring shares entails assuming the liabilities and potential hidden risks of the company. Without proper due diligence and expert legal advice, buyers may inadvertently inherit undisclosed debts, legal disputes, or other unforeseen issues that could have a detrimental impact on your investment.
Therefore, it is crucial to consult with experienced lawyers who can assist with assessing the company’s financial and legal standing before proceeding with a share acquisition, ensuring that your interests are protected and any potential pitfalls are avoided.
Obtaining expert legal advice can be a game-changer in safeguarding you against potential risks and hidden complications associated with a business purchase. We take pride in offering practical advice that cuts through the jargon, providing you with a clear understanding of the process and empowering you to make informed decisions.
Buying or selling a business involves a multitude of legal considerations and complexities. Engaging a lawyer is crucial to navigating the transaction smoothly while protecting your interests. If you would like to discuss either a business sale or purchase, please use our free 30-minute consultation and book a time with either Nick Newbery or Shannon Norling.
