Sale and Purchase of Business – Buyer | Pre-Contract Considerations
Useful for: Business, Not for Profits
In Brief
- What business structure are you buying? Company shares or assets of the business? The tax, financial and legal risks to the buyer will be different for each.
- You will need a range of information in order to take professional advice and make a decision about whether to purchase and if so at what price, including financial statements of the business, records pertaining to the business assets and operations, state of repair and serviceability of plant and equipment, terms of the lease of relevant premises, copies of employee, supply and customer contracts, and details of third party interests in any relevant assets.
- Do you need a non-compete (restraint of trade) clause in the agreement to restrict the seller from being involved in a competitor business for a period of time after completion? If you do, carefully consider the boundaries as restraints of trade that go further than what is reasonably necessary to protect your legitimate interests will be unenforceable.
- Carefully consider what warranties and indemnities you need from the seller as the liability position of the seller will differ under an indemnity from its potential liability following a breach of contract or warranty.
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