“A firm of Chartered Quantity Surveyors exclusively working on large scale international projects largely in the Middle East, we were introduced to Jane through a professional colleague when our business was relatively small. Jane worked with us to amalgamate and incorporate our UK and international businesses, forming a single company that has grown considerably over the last three years. Throughout the complex legal process and our rapid business development, Jane has been without doubt a great asset. With us each step of the way, we’ve benefited from Jane’s small operation - you don’t deal with subordinates you deal with the boss and she’s highly knowledgeable, hands on, thorough and responsive. Even though we’ve grown dramatically we will not be moving to a larger legal firm, we have all the expertise we need in Jane.”
Tim Siddons, Baker Wilkins & Smith
Selling a business or company is a complex, often lengthy process and it's important to get it right. It's also important to completely trust and, more hopefully, enjoy the company of your solicitor as you'll be seeing a great deal of them before the deal is signed off...
First things first...
1. Do not give a potential buyer any information about your business (except information that they can get from the records at Companies House) without them signing a comprehensive Confidentiality Agreement. Your business law solicitor will be able to prepare this for you.
2. Heads of Terms (sometimes called a Memorandum of Understanding) with the buyer. These are not generally legally binding but they should be comprehensive so that there is no doubt as to what has been agreed commercially. You should use your business law solicitor to help you with the preparation of these.
3. Once a Confidentiality Agreement and Heads of Terms have been signed by yourself and the potential buyer you can then allow the buyer to start their due diligence investigations. These will take two forms - the on-site due diligence by the buyer (and usually their accountants) and then the legal due diligence which is undertaken by the buyer\'s solicitors. You will often provide the answers and information to the due diligence enquiries twice (once at the on-site inspection and once as part of the legal due diligence). This can seem wasteful, time consuming and frustrating but it is something that you have to accept as part of the sale process.
4. The buyer's solicitors always prepare the Share Purchase Agreement (SPA) (if it is a sale of shares) or the Asset Purchase Agreement (APA) (if it is just the sale of the business and its assets).
This is because the buyer knows what protections, in the form of warranties and indemnities they need following the information that they obtained through the due diligence process.
5. Your business law solicitor will amend the SPA or the APA and there will be a negotiation on the terms with the buyer's solicitor. Sometimes this is easily and quickly settled but sometimes the negotiations can be protected. Each sale is different and there is no normal time frame or final position.
6. As we have already said, as a seller, you will have to give a very large number of warranties, in the case of a sale of shares, and a lesser amount if you are selling the business and assets only. Warranties are statements of facts about the company and the business. Each warranty statement is either true or untrue. You will have a long meeting with your solicitor to go through each warranty; sentence by sentence. This can often take many hours but you need to have a positive attitude to this process.
If the statement in a warranty is not completely true then you will make a disclosure stating why it is not completely true. These disclosures will form the basis of a letter (called a Disclosure Letter) which you will give to the buyer on completion. Provided that you have made a full and accurate disclosure against a warranty you cannot be later sued by the buyer after completion if the warranty is later found to be untrue. This disclosure exercise is one of the most important activities that you will perform as a seller.