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Thinking Of Selling Your Business?

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(Part 1)

If you own a limited company, the first step is to decide whether to sell the shares or its assets.  

Each case is different, but the sale of shares (usually the seller’s preference) may lead to a more complex sale contract being drafted by the buyer, as there is greater potential for unknown nasties to be hidden within a company, than within a parcel of assets.

Whichever structure is chosen the seller can usually expect the sale process to include a financial and legal due diligence phase.

The results of the due diligence will feed into the negotiation of the sale contract. 

The purchaser will want the contract to deal with specific commercial issues identified during due diligence, and to provide comfort where there may have been issues with the business in the past, as well as general assurances (covering everything from employees to IP) that the business has carried out its operations in compliance with the law (these are known as Warranties). 

There can be a separate exchange and completion, but this is usually not favoured due to the additional level of process it adds.

The Warranties are extensive primarily to prompt the seller into disclosing the ways in which such warranties are not accurate and also to give the buyer an opportunity to either withdraw or seek appropriate indemnities and/or a price reduction.

See later blogs for further information on the sale process.

Should you wish to discuss the sale of your business further, please do not hesitate to contact BakerLaw’s Head of Company and Commercial Jonathan Craig at jonathan.craig@baker-law.co.uk or 01252 730 754

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