Selling a business is a significant milestone in any business owner’s journey and warrants careful consideration and expert guidance. From ensuring compliance with all relevant legal requirements to protecting your interests and limiting your exposure to liability, a lawyer can help streamline the sale process and maximise your outcome.
This article explores the reasons why hiring a lawyer is a critical step when selling your business in Australia.
When to Engage with a Lawyer
“The best time to plant a tree was 20 years ago. The second best time is now”, goes the famous Chinese proverb.
The sooner you can loop your lawyer into the sale process, generally, the better. Your lawyers may be able to provide preliminary suggestions such as preparing a term sheet to assist you in negotiating the deal with buyers, or entering into a non-disclosure agreement before you provide potential purchaser’s access to your information.
Your lawyer can also guide you on any concerns you may have at this stage about the selling process and get a feel for your priorities and objectives for the sale.
Navigating the Process from Start to Finish
The process of selling a business involves numerous steps, which a lawyer specialising in business transactions can guide you through. From deciding whether a bespoke sale agreement is warranted, or the standardised Victorian sale of business contract would suffice, to managing the transfer of lease process, transitioning of employees, and ensuring that the business becomes the buyer’s responsibility without any ‘hangover’ on and from completion of the sale.
Expertise in Drafting and Reviewing Contracts
A multitude of documents go into selling a business, including the sale agreement, lease(s), and agreements in respect of your business assets (such as leased assets of finance arrangements, including any corresponding PPSR registrations). A lawyer with expertise in business sales can meticulously prepare and review these contracts, identify potential risks and strategies to mitigate them, and limit any post-completion risk exposure these contracts may otherwise pose to you.
Your lawyer will also advise you on and guide you through issues such as the transfer of any licences, permits, and/or intellectual property required to operate the business. Lawyers can also advise you on employee-related matters; this includes the timing for providing notice to employees who will ‘transfer’ with the sale and continue working for the purchaser, and the treatment of their accrued leave entitlements.
Mitigating Risk and Protecting your Interests
Selling a business, regardless of its size, involves inherent risks, including the transaction ‘falling over’ after significant time and expense has been invested in the sale, delay in the sale proceeding if the parties haven’t had appropriate guidance and don’t have their ‘ducks all in a row’, and breaches of warranties (i.e., binding promises) resulting in exposure to liability following the sale.
By involving a lawyer early in the process, you can proactively identify and mitigate risks, limit the circumstances in which a party can walk away from the sale after signing the contract, and minimise the chances of future legal complications.
Warranties and Indemnities
A lawyer can help you understand the standard warranties and indemnities (i.e., promises to financially protect the other party if the specified circumstances eventuate) typically provided by a vendor of a business, and whether there are any existing circumstances or contingencies which need to be reflected in, or excluded from, the warranties and indemnities provided.
Conclusion
Selling a business is a complex and multifaceted process; having a lawyer by your side can significantly reduce the stress of trying to navigate the process and optimise your end result. From contract drafting and review to managing your post-completion risks, a lawyer can provide invaluable guidance and support along each step of the process, enabling you to sell your business with confidence and peace of mind.
Our friendly team of legal professionals at QR Lawyers is always happy to provide guidance, whether you’re ready to sell now or considering it in the future. Get in touch today to find out more.
DISCLAIMER: This article is intended to provide general information and should not be relied upon as legal advice. Formal legal advice should be sought if you are concerned about, or require particular advice applicable to your specific circumstances in relation to, any topics covered in this article.