Arranging Contracts

Arranging Contracts

Unless the transaction is very small you will need to appoint a solicitor to act for you, in very much the same way as for buying a house.

Very small transactions

With very small transactions a solicitor's fees could add a disproportional amount to the cost of acquiring the business. Very occasionally, in these circumstances, the business transfer agent will agree to act as an independent facilitator for the parties. The sale price would need to be small, up to an absolute maximum of $10,000, and the transaction very simple - possibly something like a low-key cleaning service or mail order business operated from home. There would need to be no property purchase or lease involved, or indeed any major assets at all, and the terms between buyer and seller would have to be very straightforward.

If you think your transaction falls into this category, and you do not feel able to do it all yourself, it may be worth asking the business transfer agent if he is willing to undertake this for you before approaching a solicitor.

Appointing a solicitor

Solicitors are like many other professionals - there are horses for courses. A firm that is excellent for divorces or wills may have no experience with business transactions, and it is therefore important to ensure that the firm you appoint has the necessary expertise.

Although ultimately you are always protected by the Law Society against losses suffered due to the negligence or dishonesty of a solicitor, buying a business can be legally quite complex, so you need more than just that comfort. A good solicitor will ask all the right questions of the other side, will give you the best protection in the contract with the vendor (which will often be more complex than the standard one for buying a house) and will be able to give you good advice throughout the progress of the transaction. If he is commercially aware, he will be able to advise you on any detailed negotiation points with the vendor that arise during this stage - for example, what is included in the contract with respect to acquisition of stock. Therefore you need to ensure that you appoint a solicitor who has the right experience. If you do not know such a firm yourself, ask friends or relatives who own businesses, or ask the business transfer agent for a recommendation.

Make sure that the solicitor is aware of any valuation report or survey that you or your lender have had commissioned, and that he gets copies so that he can ensure that any recommendations for further reports or enquiries are carried out.

Contractual terms

You will need to discuss with the solicitor the conditions that you have agreed with the vendor so that he can include them in the legal contract.

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