Let’s be honest, if buying or selling a business was easy, you wouldn’t need professional advisers to help! The biggest problem we find is that clients wait too long to involve their solicitor to deal with the “little” things – like creating the contract or agreement for the sale or purchase – and that’s just the start.
”Your solicitor will help you get the basics right. They'll help you identify what it is you're buying and from whom.
There was a well-worn phrase used in a Law Society of Scotland advert many years ago – “it’s never too early to call your solicitor”. This advice has never been more pertinent than when you’re considering buying or selling a business. Many of our clients who are involved in this kind of activity tend to discuss the deal with the seller or the buyer in great detail. They’ll discuss the deal with their accountants and if there’s property involved they’ll, perhaps, discuss it with a surveyor. It often seems to be the case that only after doing all this does it dawn on them to speak to their solicitor! Your solicitor will help you get the basics right. They’ll help you identify what it is you’re buying and from whom. Sometimes clients are under the impression that they are only buying the assets of a business when, in fact, the seller is intent on selling the business itself. There is a world of a difference between these and, in particular, in relation to who carries all the liabilities. Even if you’re “just” buying the assets of the business, are those assets debt free, subject to some sort of security or actually owned by the seller?
Then there’s the whole “people thing”. Are you taking on any employees of the business you’re buying? If you are, do you appreciate the potential liabilities of doing this? If you’re the seller, will you be able to transfer over the employees without any ramifications? Even the simplest of things can cause problems. Is there property involved? If there is, are you buying the actual property or are you taking on the lease of the property and, if it’s the latter, you’ll not only inherit the current lease but you’ll also need the landlord’s consent. If there are any licensing or third party contract issues, these need to be negotiated otherwise you might only get part of what you bargained for. Perhaps one of the simplest examples can show you just how complex buying or selling a business can be. Let’s say, for instance, the business that’s being bought or sold is the traditional corner shop. Fine, you think. I’ll buy the shop, all of the stock and take over the part-time members of staff to help run it. But, there’s a liquor license that’ll need to be transferred into the purchaser’s name. There are the contracts for the lottery and the ATM. Oh, and, of course, the very important sub post-office that’s part of the business.
All of these items need third party approval if you are to acquire them as well as the basic business. A failure to have any one of these ancillary items transferred into your name, if you are a buyer, can have a very significant effect on the turnover or profitability of the business. If you are a seller, you might end up with a contract you’re stuck with because it can’t be cancelled or transferred to the buyer! As you can see from this short list, what might appear to be a simple, straight forward transaction can, very quickly, turn into a minefield.
We’re here to help you right from the start, so if you’re thinking about buying or selling a business, call us at Clark Boyle on 0141 227 2200 or use the contact button below for further information.