Preparing for the sale of your business - a completion checklist
Congratulations, you’ve successfully negotiated the key commercial terms of the sale of your business with the buyer and the contract of sale has been executed by the parties and locked down. It is now time to prepare for completion.
To complete the sale of your business, you will need to prepare documentation to transfer the business and assets including any intellectual property (e.g. the business name, trade mark, domain names, email addresses, social media accounts, contact telephone numbers and the like). You will also need to continue to operate the business in the usual course and continue to maintain any equipment and stock at normal levels.
For any business operating from a physical space such as a shop, office, warehouse or factory, the lease is a significant part of preparing for completion. This process can be time consuming so being organised is essential.
If the buyer wishes to negotiate a new lease with the landlord or they intend to operate the business from a different premises, you will need to either terminate or surrender your old lease. You will need to be mindful of any break costs and the cost of making good the premises. You should also ensure that you are released from any future obligations under the lease and any security has been returned. Again, it is important that all of this is properly documented prior to completion. It is also important that this course of action is canvassed with the landlord as early as possible in the transaction so that any of the landlord’s requirements in relation to the surrender or new lease can be properly considered and negotiated.
If the lease is a retail shop lease then there are certain disclosures that need to be made within a set timeframe pursuant to the Retail Shop Leases Act 1994 (Qld) (Act). There are specific timeframes that need to be adhered to, so it is critical that the process to transfer the lease commences as early as possible. Otherwise completion may have to be delayed in order to satisfy the requirements of the Act.
In transferring or surrendering a lease, it is particularly important to consider what obligations may be triggered as a result of a lease transfer or surrender (for example, repayment of incentives or return of equipment etc). Such obligations should be catered for and taken into account as part of any business sale.
This checklist sets out some of the main items which generally need to be dealt with in order to complete the sale of a business. This list is not exhaustive as each business is different and the items required for completion are dependent upon the particular industry of the business, the location of the business and the commercial terms of the sale.
Search the Personal Properties Securities Register (PPSR) to make sure there are no securities registered against the equipment or assets of the business. If securities have been registered, then you will need to have the securities released at or before completion.
The secured party will ‘release’ the security if you pay the full amount owing on the equipment or the buyer agrees to take on the debt.
Arrange the transfer of any licences which are used or required to operate the business.
Obtain landlord consent to transfer any lease/s and sign all required documentation before completion.
Remember to also make an adjustment to the purchase price to account for any rent and outgoings payable under the lease.
If the buyer is intending to assume the liability for any equipment leases used in the business or you are required to pay out the equipment leases under the terms of the business sale contract, then you should contact the financier to arrange to either transfer the equipment lease to the buyer or pay out the equipment lease prior to completion.
Either transfer or terminate any business contracts you have with third parties such as suppliers. Whether you can transfer the contract to the buyer will depend on the terms of the agreement with each supplier. You may need the consent of the supplier to transfer the contract.
Notify the employees of the sale and confirm whether the buyer will be making offers of employment to keep them on. You will also need to notify the buyer what employee entitlements each employee is owed as at the completion date.
It is common practice for the buyer to assume the entitlements of any of the employees it chooses to employ and request a reduction to the purchase price as compensation for the liability of entitlements assumed.
Request a transfer key via ASIC Connect online to transfer the business name to the buyer.
Organise the transfer of the business’ intellectual property (trade marks, email addresses, domain names and websites) to the buyer.
Arrange for the cancellation or transfer of the relevant utilities and services such as phone connection, water and electricity.
If the stock is not already included in the purchase price for the business, you will need to organise a time with the buyer to undertake a stocktake. The terms of the sale contract should set out when and how the stocktake should occur.
If you are buying or selling a business in the near future and you want to discuss anything raised in this article or any other issues, please don’t hesitate to contact HopgoodGanim Lawyers' Private Enterprise team.