Template agreement for buying a company

[pippilongstockings]

Hello!

Does anyone know where I might be able to find a template agreement for buying a company?

Thanks,
Pippi

 

[mahutchinson]

I wouldn't even start to look. It depends entirely on the type and size of business. A cut and paste tick box approach to the contract won't work as you are bound to omit something vital. Get a lawyer.

 

[KidsBeeHappy]

Netlawman is very good, and people at the end that can edit your contract if required.

(I used the Scotlawman for Scotland specific documents)

Kind regards
Sandra

 

[pippilongstockings]

Thanks for your replies, will have a look at netlawman Sandra. I thought I might be being a bit optimistic about being able to do it myself! The thing is it's a tiny business at the moment and has a tiny budget to go with it......! I guess it's worth spending the money though to get a watertight contract? Any ideas how much this might cost me?

Thanks,
P

 

[Free Lance]

Can you give some ball park range of the amount you are paying for the shares?

That is only one element. If the target company has been trading for a long time then, even if it only costs £1 to buy the shares, the risk is that you are acquiring all the liabilities of that company as well.

The legal liability should not 'leak' into the buyer but the headaches in management time for buying a defective company can damage your own ongoing business.

If you're buying a company that has one shareholder, very little or no trading and it is a simple cash purchase then you could almost do it yourself. But if you have a budget then use it sensibly on a lawyer.

The costs also depend on how much due diligence (investigations) you are doing into the company. Even small companies should be investigated. There is a relatively recent post in the general section about an almost terrible mistake made buying a very small company. The target company sold stuff over the internet. Accounts looked very healthy but when the buyer did some digging it turned out that there were only 3 customers - 2 of whom were family of the seller who were simply buying goods at inflated prices then selling them on themselves. No real business existed at all.

 

[The Resolver]

The only template to use when buying a business is one to help cut the right size hole in the floor to escape into when the problems pile up! But the sale and purchase contract templates are just memory-jog guides for solicitors and other professionals to use but not the clients. The size of the company has absolutely zero to do with it save for the need to make the cost proportionate. No matter how small the company and its operation the issues are many and complex and need to be addressed with knowledge.

Cost does not need to be heavy. As I have retired from the hustle and bustle of running my own practice, I can now offer my 30 years experience at a cost that does not need me to include a share of the much greater cost of employing staff and all the other office overheads (I work from home with an occasionally visited office facility in central London). I can both draw up the contract and set out a list of the Due Diligence steps to be taken before committing yourself . These are provided as a step by step guide which you can follow yourself to reduce costs even further. I have recently completed a business acquisition for another UKBF member and can offer his reference.

Email me on [email protected] for a fixed fee quote and general no obligation chat.

 

[pippilongstockings]

Hi Free Lance,

I'm paying £2400 for the business and also buying all the stock. It's an online store and the current owner pays for all stock when ordering it so there shouldn't be any liabilities (or am I being niave?).

Currently she is running her business as a sole trader but I'll be setting up a ltd company. To be honest, the business itself is worth very little at the moment so the money I am paying is mainly for the customer database, the website, domain names etc and her reputation on various forums etc (very good).

P

 

[The Resolver]

If you're buying a company that has one shareholder, very little or no trading and it is a simple cash purchase then you could almost do it yourself.

If there has been little or no trading (and no accumulated trading loss to benefit from) then why buy the company at all? If it has assets, some equipment, a website, a good domain name, a registered trademark etc, then just buy the assets under a different form of contract with a non-compete clause and others as appropriate. The contract can also include the customers being referred on to you.

 

[Free Lance]

The good news is that you are not buying a company. I think that has led to a number of the posts.

What you are buying are business and assets from an individual. Other posters, including myself, thought you were buying the shares in a company.

The good news is that your potential liability is less going forward - you do not assume the liabilities or debts of the seller. She remains personally liable for those. The bad news is that you have kind of flagged up that you do need a bit of legal support to make sure you are using the right type of contract. A business and assets purchase of Intellectual property, etc. is very different from a share purchase - even if the sample contracts you might see look superficially the same.

Difficult call - such a low purchase price that you might not think it justified to spend a similar amount on a solicitor.

Key points for you are: make sure she owns the customer list and website, etc. She should give you legally binding assurances that she does (she probably doesn't own the website if she got someone to develop it for her!). Make sure she agrees not to compete for a length of time. Make sure there are no employees that she has in relation to the website - that is one liability that you can acquire by operation of law (google TUPE regulations).

I have some suggestions on lawyers who will work to a budget. Don't just wander into any old local firm of lawyers. PM me for more info.

Good luck

 

[The Resolver]

Hi Free Lance,

I'm paying £2400 for the business and also buying all the stock. It's an online store and the current owner pays for all stock when ordering it so there shouldn't be any liabilities (or am I being niave?).

Currently she is running her business as a sole trader but I'll be setting up a ltd company.

Ahah! So it is an asset purchase by your new ltd company. OK - much simpler.

As to liablities, there may well be liabilities (she could have signed up for any sort of contractual liability eg SEO services etc) but the contract should make it clear you do not take them over (save any you specficially agree to).

You have to check she does own everything. For example, did she use a website developer and ,if so, does the agreement with them clearly transfer all rights in the site and in the domain to her?Often companies retain until payment in full. You also need to investigate the continued availability of future stock.

I don;t know how personal is her business, but bear in mind that whilst she has developed goodwill in her name that you will have to declare on the website that your company now runs the business.

 

[pippilongstockings]

TDR and Free Lance,

Thanks both of you! Yep, I've been rumbled - I have absolutely no experience of legal agreements etc!! You're right, I do need legal help don't I?!

TDR -will email you this afternoon if this is still something you think you could help with?

Free Lance - any recs would be great, thanks.

P

 

[Moneyman]

I would get a printout of the current financial position of the company and a list of the assets. Then get the vendor to indemnify you for any incorrect statements or outstanding invoices, inland rev, vat etc that are not within those figures. keep it in words you both understand. In a way it is more important that you both understand the agreement than having some legalese document that you might argue over later but not understand.

 

[Ader]

If buying a business, make sure there's the right VAT clauses in there especially re 'Transfer of Going Concern' and there's a few other tax warranties that you may need in there too depending on exactly what assets you're buying.

Any half decent lawyer will know what to put in.

 

[Lime One]

A template option for purchase of a business is really not going to be sufficient unless you are very experienced in this field of law. As TDR states the core question is really should you be buying the business or is there another and better way to achieve the same purpose?

Happy to discuss this with you, free of charge and to provide a quote for the work needed. We draft in the region of 12-15 business sale agreements per month and costs start at just £140 plus VAT so it is easy to keep the costs in proportion to the value of the business. All work, as we are retired solicitors and barristers, is covered by our £2M professional indemnity insurance policy.