The recent rumours regarding changes to the CGT rates and the entrepreneurs reliefs created a surge in business sale transactions in the second half of this financial year. Now that the government’s changes have officially been announced, its likely that many may decide to push forward transactions before the next increase in tax rates comes into effect in April of 2025.
This may seem like a considerable amount of time, but selling a business can take time, not just with regards to dealing with the legal aspects of the transaction but the planning stages. From taking advice to structuring the deal and negotiating sale value, can mean that this window gives little time for sales to take place.
What can be done?
Planning is crucial - Whilst it may seem sensible as time is against you to jump straight into the transactional work, inevitably if this is done the negotiations will become more drawn out and it is likely that the transaction will be delayed.
Seek professional advice from the earliest possible stage - Speaking to your tax advisor and accountant, as well as consulting with corporate finance professionals, alongside your lawyer, can ensure that early negotiations cover the key points, and as far as possible avoid later changes which can cause delays and duplicated work.
Get your due diligence in order - As part of the sale you will be expected to produce certain financial and legal information about your business. The questions are usually fairly standard and you can get a head start on these which may help you speed through the due diligence process.
Here are my top tips for getting your legal due diligence in order in advance of the sale;
- Check and ensure that the company’s statutory books are up to date and are in order – many companies overlook this, and then resolving any issues can become time consuming for all parties involved in the transaction.
- Have lists of the company’s contracts, customers and suppliers, which can be manipulated to give information on volumes and rates, payment dates etcetera.
- Ensure that you have collated details of all employees, including the type of contract they are each on, employment dates, pay and bonus details.
- Have to hand details about pension enrolments and any opt outs.
- If the company has been involved in litigation other than debt recovery ensure you have the details and can explain / put this into context along with any outcomes and the current position.
- Review and discuss the company insurances with the company’s insurance broker. The buyer will expect to see details of the company’s current insurances, as well as claims history for up to the last 5 years. You should have full details of any ongoing insurance claims and recent notifications.
- Ensure that the company has complied with its ongoing GDPR obligations and you have appropriate policies and procedures in place.
- Have copies of any title documents for any property occupied or owned. If premises are leased then a copy of the lease will be required. For leases which have only a short term remaining an initial discussion with the landlord about renewal may be helpful to the buyer.
The due diligence requirements will vary from business to business depending upon its type and the sector. Other relevant aspects may be its health and safety records, compliance documents and / or any licences held to conduct the business.
If in doubt your solicitor will be able to advise you of any specific due diligence requirements.
The team corporate law team at Stephensons have extensive experience acting for sellers selling their shares or business assets. We regularly collaborate with trusted professionals to ensure that you have a full team of professionals to look after all aspects of the sale. If you require advice or assistance in relation to preparing your business for sale call us today on 0161 696 6170 to see how we can help.
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