Selling a business involves several steps, moving parts and legal documents. Once you negotiate and exchange a business sale agreement with the other party, parties must transition to the completion process. This broadly involves the buyer and seller’s lawyers working together (and with their respective clients) to fulfil a number of obligations. Once all parties satisfy these obligations, the sale will be complete. Completion can be a stressful and overwhelming process, so it is useful to prepare a completion checklist to keep track of progress. This article discusses the key stages and documents common to most business sale transactions.
Before the parties can complete the sale, there are several steps they must take to get ready for the big day (known as completion day). Each of the buyer and seller’s lawyers must review the business sale agreement carefully to ensure their respective clients satisfy these steps. Indeed, many of them can take time and may delay the sale if left to the last minute.
The table below sets out some common pre-completion steps and the documents required to satisfy them.
Throughout the business sale agreement, there are several conditions that must be satisfied before the completion date. These are known as conditions precedent.
It is usually a term of the sale agreement that if these conditions are not satisfied by the relevant party (or waived by the party which has the benefit of them), the other party can walk away from the sale. In the case of the buyer, they can potentially have their deposit refunded.
The table below sets out some common conditions precedent in a business sale and the documents required to satisfy them.
On the completion date, both parties must work together to fulfil their respective obligations. Completion can differ greatly between transactions depending on what the business is and what assets are being sold. However, there are some obligations that are usually present in each business sale. Once the completion obligations have been fulfilled by both parties, the sale has been completed and the buyer is now the legal owner of the business.
The table below sets out some common completion obligations in a business sale.
Sometimes there are post-completion obligations for the seller. These often include training the buyer on the business processes for a certain period of time. It can also include an agreement to be on call for a certain period of time for technical questions and assistance following the sale. The seller will usually have restraint obligations to comply with a certain period of time post-completion.
Completion can be a daunting and stressful process, as there can be a number of steps and obligations which both parties must adhere to ensure a smooth end to the transaction. Completion involves a three-step process: pre-completion, day of completion, and post-completion. All of these steps involve different documents and requirements.
Of particular importance are the conditions precedent in the pre-completion stage, as if these are not fulfilled or waived, the other party will usually have the right to terminate the agreement and walk away from the sale. Likewise, in the case of the buyer, they can potentially have their deposit refunded. It is a good idea to keep a completion checklist handy so all parties can keep track of where things are at with completion.
For assistance with completing your business sale, our experienced business sale business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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