In most if not all cases, it is strongly recommended a lawyer be involved in sale or purchase of a business. Failure to do so can give rise to disastrous consequences, and we have seen many of those in practice where clients have come to us too late after the transaction has been undertaken.
What are some of the things a lawyer might be able to assist within a business sale or purchase?
Lawyers can be particularly useful in all stages of any business sale or purchase transaction. Areas of use include:
- Assistance with formulating a pre-contractual offer, which may be in the form of a binding or non-binding term sheet, heads of agreement or simply an email;
- assistance with legal due diligence – this usually involves a pre-purchase review of the legal state of the business to ensure you get a better idea of what you’re buying into. Assistance with due diligence can include undertaking review of material business contracts (such as client agreements, franchise agreements etc) or property leases, undertaking searches to investigate the status of the business and the sellers or buyers (eg bankruptcy searches, court searches to check for active proceedings concerning the business, sellers or buyers and various other enquiries).
- Assistance with either drafting or review of the sale contract – this is critical in my view;
- Assistance with implementing the transaction itself and post-transaction steps – again, considerable problems can arise if proper legal advice is not received here.
What are some of the risks if I do not engage a lawyer?
We’ve seen situations where clients have not been represented (or been poorly represented) and ended up acquiring businesses which remain subject to a seller’s finance, or situations where a seller has continued to personally guarantee a buyer’s creditors or bank obligations after the sale, or where restraints of trade have not been included in sale documentation and sellers have set up business nearby or poached key customers. There are countless other examples. The end result in failing to obtain expert advice is often that a legal dispute arises either during the transaction or afterward, and all parties involved end up incurring considerably more in legal fees than they would have if they had simply taken advice and been properly represented when the sale or purchase transaction took place.
It is important to seek specific advice from Rockhampton Lawyers regarding your circumstances as this fact sheet provides general information only and does not constitute legal advice.