A transaction regarding the purchase and sale of a business can be a legal and financial headache. When you are selling a business you are transferring ownership of assets, responsibilities and a bundle of rights to the owner. In order to avoid any future disputes and ensure both parties can clearly identify exactly who owns which components it is vital that the specific terms and conditions of the transaction are clearly expressed in an agreement.
Business Sale Agreements
can be entered into when a sale or purchase of a business has been negotiated and the important terms and conditions of the sale or purchase can be set out in the agreement.
Below are a list of the key legal elements that you must consider when creating a Business Sale Agreement.
The Transfer of Ownership:
It is important to describe in full the nature of the arrangement where the business is being sold. The agreement should provide:
- The full name and ABN of the vendor of the business;
- If more than one entity is sold, provide relevant ABN of each entity;
- The full name of the purchaser of the business.
Particular items to be transferred:
Ask this question: Is everything necessary for the continued operation of the business being sold under the arrangement? If applicable, describe items that are not being sold and why they are not needed.
Items which may be necessary: premises; plant and equipment; licences; permits, quotas; goodwill; restrictive covenants; intellectual property; franchises; employee skills and knowledge; client/customer lists; supplies; fixed assets; advertising material; and rights under contract (lease contracts, contracts of supply to the enterprise, customer contracts).
The vendor’s conduct pending completion of the sale:
It is necessary to consider if the vendor will carry on the business until the day of the sale or if the sale has already been made, did the vendor carry out business until this day?
A Restraint Clause:
A reasonable period of restraint should be agreed upon by both parties whereby the vendor cannot be involved in a business similar to or in competition with the business. The vendor may not disclose or communicate any confidential information of the business.
Include the payment or if the payment is not included explain how it will be calculated.
Terms and Conditions:
Define the important terms and conditions once the sale has been negotiated.
The relevant parties warranties are contractual statements of fact and act as a mechanism for protecting the sale as well as drawing out the issues at the time of sale.
Employees (including in relation to superannuation) debtors and creditors of the business:
It is important to disclose information relating to the employees, debtors and creditors at the time of sale.
Use the LawPath Business Sale Agreement to easily create a Sale Agreement for your Business.
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