Can I sell my business without a solicitor?
Are you thinking about selling your business? Even if you’ve done it a hundred times before, there’s a number of very good reasons why you should probably use a solicitor to sell your business.
You might be tempted to deal with the selling of your business without a solicitor. I mean, you’ll save several thousands of pounds, if not tens of thousands. But the law surrounding selling a business is not straight-forward and getting it wrong is likely to be incredibly costly!
Say you’re selling your business for £1.5 million. I’m quite sure you’d prefer to have 100% of that paid and in your account to enjoy, invest, retire, or spend (whatever your preference). The last thing you’ll want is the buyer making a claim, which could involve repaying the whole purchase price(!). No, it would be better to ensure you have a great business sale solicitor to protect you in the negotiations.
A good lawyer with business sales, tax and due diligence experience will keep you informed throughout the process with valuable advice.
Understand the legal process
Before you start selling your business, you need to understand the legal process involved. You should also consider hiring a solicitor to help with the sale. If you do decide to go through the process yourself, here’s what you need to know.
There are two primary methods of selling your business – an asset purchase or a share purchase. While the documents are different the process is similar:
- The buyer carries out legal due diligence.
- The transaction documents are prepared, reviewed, negotiated and finalised.
- The seller makes disclosures against any warranties.
- Completion – you get your money!
If you’re attempting to sell your business without a solicitor, you’ll need to handle all of this yourself.
What documents are needed to sell a business without a solicitor?
The first part of the process is the answering of information requests from the buyer and provision of so called due diligence. This will include all the related documents supporting each question asked, and may include
- Tax returns
- Balance sheets
- Reports from Auditors
- Lists of Assets
- VAT registration details
- Licences
- IP
- Funding/loan/bank information.
The more historical business records you have, the better. If you’ve had regular business audits, be sure to compile this information as it’s valuable to your prospective buyer.
What legal documents are used to sell a business?
As mentioned above, there are two primary types of business sales:
- Asset Sale/Purchase – in which case the agreement will be an Asset Purchase Agreement (known as an APA) or Business Purchase Agreement or Business Transfer Agreement
- Share Sale/Purchase – in which case the agreement will be a Share Purchase Agreement or SPA
Usually the buyer (or buyer’s legal team) prepares these documents, but there are plenty of other documents which as a seller you’d usually prepare and these include:
- Replies to information requests
- The Disclosure Letter
- Board Minutes
- Stock Transfer Form
- Indemnity for Lost Share Certificate
- and other ancillary documents
So when considering whether to sell your business without a solicitor, make sure you have access to these documents or you’ll find it even harder.
Why use a solicitor when selling a business?
First and foremost, because you will be able to rely upon their expertise in selling businesses. A good business sale solicitor will give you advice on the deal, the words on the page, how to protect your interests, what disclosures to make and how, how to minimise the impact of the warranties, restrictions, and much, much more.
A business sale solicitor will also be insured – get it wrong yourself and you’ve only you to blame – but if a solicitor somehow gets it wrong, then you can claim off their insurance.
There are often hundreds of pages of complex legal documents in a business sale. Each word and sentence, if wrong, could be very costly. So be prepared to go through tens of thousands of words to make sure there are no gaps or loopholes for the buyer.
If you’ve decided you don’t need a solicitor when selling your business then GOOD LUCK to you. However, if you determine that having a solicitor might be a good idea then you’ll want to look for a business sale solicitor who is experienced, who does business sales a lot, is recommended, and who is approachable and contactable.
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