Selling a business can be a time-consuming, stressful and even complex transaction. It can involve numerous documents being prepared, negotiated and exchanged between the Buyer and the Seller. It will, therefore, require good time management as well as organisation skills. This is particularly the case from the Seller, and will often require the Seller to carry out a pre-sale process. This is to ensure that it is in the best possible position for the sale in question.
This blog will provide a checklist containing information and documents likely to be expected from you once you have decided to sell your business by either your solicitors or the Buyer if solicitors were not instructed. Please bear in mind that the list is subject to the complexity of the transaction. Some of the points below may also not be applicable to your business.
For the main steps involved in selling a business please refer to our previous blog, available at:
https://www.fjg.co.uk/blog/2019/03/13/main-steps-in-buying-or-selling-a-business.
The sale of a business involves a process known as ‘due diligence‘, which is often one of the first processes carried out in a transaction. During this process, the Buyer prepares a document knows as a ‘due diligence questionnaire‘, requiring, at times, vast information and documentation from the Seller in relation to the business being sold. The Seller will then have to provide such information and documents in response. It is, therefore, essential that all Sellers have this information to hand, up-to-date and with all correct information therein; in order to make the due diligence process as smooth and cost-effective as possible.
It is often the case during the due diligence process that issues with paperwork, records or various other items arise which can cause significant delays to the transaction or even cause the transaction to become abortive. Some of the information that may be required includes (but is not limited to):
Question |
What it may entail |
Tick |
Corporate structure and records |
Memorandum and articles of association, all resolutions passed within the last 2-3 years, copies of the company’s registers (members, people with significant control, charges, etc), copies of minutes book, and any powers of attorney granted by the company.
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Share capital and shareholders |
Details of the company’s issued share capital, any shareholders’ agreement, and details of the members and their respective holding.
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Accounts |
Copies of accounts for the past 3-5 years, including dividends, bonuses or other distributions made or declared by the company and forecast budget.
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Finance and banking |
Details of the company‘s bank accounts, overdrafts, debentures, mortgages, charges etc.
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Contracts |
Any agreements, contracts, obligation or liability of the company, terms and conditions of sale or purchase.
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Intellectual property |
Details of any registered/unregistered intellectual property rights and/or any infringement claims brought by or against the company.
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IT and data
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Details of all computer systems, software, subscriptions and maintenance, together with any disputes, breaches, monitoring and compliance.
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Insurance |
Details and copies of all insurance policies.
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Compliance |
Confirmation that the company is compliant.
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Litigation and Disputes |
Details of any ongoing or threatened litigation, arbitration or mediation. | |
Employment |
A list of all employees together with their employment contract, employee handbook, benefits, bonuses, pension schemes, details of the company’s disciplinary procedure, and details of the staff turnover.
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Retirement benefits |
Details and copies of all retirement benefits. | |
Real estate |
Details of any freehold or leasehold properties owned by the company, mortgages, debentures, charges, planning permissions (current and past) etc.
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Health & Safety |
Details of the policy, compliance, breaches etc.
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Bribery and corruption |
Details of the policy, compliance, breaches etc. | |
Tax |
Details of tax returns, confirmation whether the company paid its tax as it fell due, etc. |
Subject to the complexity of the transaction, there may also be a financial questionnaire requiring more details in relation to the company’s accounts, tax etc.
By collating this information and documentation prior to instructing solicitors for assistance in the sale of your business, it is likely that you will save legal costs and time. This is because the due diligence process (which is extensive in relation to both legal costs and time) will be more straightforward.
Our Corporate Commercial Department here at Fisher Jones Greenwood LLP can provide you with a model of a due diligence questionnaire so you can peruse the questions and documentation that will be expected from you once the due diligence process has started.
The Corporate Department can guide you through the transaction as well as assist with preparing any relevant documents. Should you require any further information or assistance please do not hesitate to get in touch – call 01206 700113 or email [email protected].
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