Thinking about doing the legals myself!

[Kiran123]

Hello

I am currently in the process of buying a ltd. comp.

The purchase comprises of the below components only.

• 100% shares purchase.
• Signatory of bank account held in company name.
• Clients database.
• Self-employed employee details.
• A few telephone line.

There are NO assets, employees, companies loans etc.

Whilst I realise solicitors are there for a reason, I believe this company to be totally genuine and safe to purchase (a friends).

Do you think I should take care of this myself buy getting the various forms ie.Stock transfer forms, a basic contract(adding specifics).

It's just that the solicitor wants £200+ VAT ph for the approx 10hrs of work by the time he finishes it will be another 3hr meaning 600quid more!!! then I have to pay the .5% stamp on the purchase price.


What do you think???

Any thoughts would be great!

Thx
Kiran

 

[Lime One]

Mainly you will pay more long term if there are any problems with the transfer of client data ie does the company transferring this actually have the rights to do so in line with current Data Protection rules? The self employed contract could also land you in trouble as many are woefully out of date and support HRMC on investigation for categorising the self employed person as an employee. The PAYE debt would land at your door.

The sort of stuff you need to be tying up in the contract are the business model, not allowing the previous owner to set up in competition and IP such as logos, web content, designs etc. Previous debts emerging out of the woodwork should also be tied off. I am thinking here of some claim in the future for professional negligence which can emerge post sale. There is a fair degree of risk in buying any business and a good commercial lawyer will mitigate this for you.

10 hours is a tad excessive in my view for the work involved in putting together the agreement and checking the paperwork with another 3 hours to conclude this if your list is all there is. I would suggest getting a fixed cost quote from us and others and see the difference in fees that can be achieved.

 

[Geoff T]

2 suggestions if I may...

1. "friend" huh?...if you want to keep the friend, do it properly!

2. take Limeone up on his offer/advice and get quotes

regards
Geoff

 

[Kiran123]

Agreed.

Going to do just that!

Thx!!

 

[Geoff T]

you're welcome!

 

[The Resolver]

If you are buying the shares in a ltd company and the ltd company lawfully compiled and own the client database (and you will make the same use of the data as before when the data was initially obtained and you are not moving it offshore) then there will not likely be a Data Protection issue. However you need to establish the basis on which the data was taken and whether the conset has by now been breached by length of time it has been held (the Act also regulates how long you can retain data notwithstanding it was lawfully obtained in the first place).

You needgood knowledge of past trading beyond the sales figures and an audit of current legal risk (ie past customers with a potential right of action exercisable up to 6 years).Remember you are buying the company which was the contracting party with the customers. This risk depends on the nature of the business. A service business is more risky .

I'll PM a quote

 

[obscure]

I agree with Geoff. I get a shiver down my spine when I see the word "friend" in this context. It is amazing how frequently friends turn out not to be when they have the chance to make a buck or offload a turkey. Take proper legal advise.

 

[mahutchinson]

Looks to be very little work involved in the actual transaction. Most of it will need to be done by the current directors anyway. I would say the more important aspect is the due diligence and making sure you get all required documentation on the assets.

 

[dylanmarlais]

As someone has stated, you need to carry out due diligence (lawyer-speak for i'nvestigations').

The due diligence will be legal and financial. I am assuming you have not appointed an accountant to look at the books etc. I will say nothing about the accounting due diligence but this is clearly important.

If you skimp on the legal due diligence, then understand fully that you are doing so. In buying the shares of a limited company, you are acquiring the company with all its hidden liabilities.

If you still decide to skimp on the due diligence then ask your friend to give you extensive warranties and indemnities. These would have to be worded carefully. In short, you will be asking him to warrant there there are no hidden liabilities and, if there are, to indemnify you against any such liablity.

As you say, "Whilst I realise solicitors are there for a reason, I believe this company to be totally genuine and safe to purchase (a friends)". If the company is as safe as you say, your friend should have no difficutly in providing you with the necessary warranties and indemnities.

I do not know how much money you are handing over. But be aware that an indemnity is only as good as your ability to recover money. If the friend has spent the money or retired abroad, this may not be easy to do.

You may glean from the above that I think you would definitely benefit from some legal advice here.

But it is all about the level of risk, is it not? If you are convinced it is safe and you do not want to pay the fees, then you can take a punt. If the company is then sued for so much money that it has to be wound up, then you will lose all and may have no recourse to your, by now, "ex-friend" - but you will have saved the lawyer's fees.

 

[dylanmarlais]

Actually, it is important to ask for extensive warranties and indemnities even if you carry out full due diligence.

 

[Veritas]

If not, just by database as an asset - that way you don't have to worry about any liabilities the company may have.

 

[dylanmarlais]

Excellent advice by Veritas.