Buying a Business?

What is the process if I am buying a business?

If you are buying a business and need legal advice then you need to contact our expert Company and Commercial team of Solicitors.

Before you commit to buying a business, you need to carry out Due Diligence. This will be different for every business. It could be anything from assessing stock and equipment to checking to ensure patents are in place and are not about to expire. Do you have a Shareholder Agreement in place and is it up to date?

A Share Purchase Agreement is a binding Contract between Seller and Buyer, whereby the Buyer agrees to purchase some or all the shares of a Company. This is usually how investors will seek to ‘buy into’ a company that is already well established. The type and quantity of the shares purchased will determine the degree of control you will have going forward as a shareholder of that company.

Alternatively, an Asset Sale Agreement is also a binding contract between Seller and Buyer, where the Buyer purchases the assets and goodwill of the business or company. Assets may include, but are not limited to, plant and machinery, stock, service contracts and premises.

When it comes to the finances of the business you are about to buy, don’t just take the seller’s word for it, have your own accountant assess the business. You may need to bring on board an invoicing or projections expert. It is always essential that your accountant works with us to ensure your tax position is protected upon the purchase.

If the business you are buying relies on Patents or its Trade Mark, you should recruit an expert to ensure that everything is in order for you to continue with the business at full steam ahead from day one. Similarly, if the business has a large workforce, you may want an HR person to take a look at the employment contracts and any bonus or benefit schemes.

In order to access information relating to the business you wish to purchase ahead of completion, you may be asked to sign a Confidentiality Agreement. This is usually negotiated as part of the Heads of Terms, which are drafted early on in the process. The more information you have about the proposed purchase, the stronger the position you are in to negotiate.

What if there are existing employees? Will they become my employees when the purchase completes?

 The Transfer of Undertakings (Protection of Employment) Regulations (‘TUPE’) protect employees when they transfer to a new employer. TUPE must be followed in the event of a business transfer or service provision change.

An example of an important TUPE provision is under Regulation 13. The employer has a duty to inform employees of the upcoming transfer. Therefore, as the Buyer, you must ensure enhanced due diligence is undertaken to ensure that the Regulations, such as this, have been complied with.

A failure to comply with TUPE can leave both the old employer (Seller) and new employer (Buyer) vulnerable to employment tribunal claims by the employee. In some cases, these claims can be large enough to undermine the entire transaction in the first place.

We excel at providing clear, practical advice delivered in a straightforward manner if you are buying a business and need legal advice, so if you are about to embark on buying business and would like to know how to maximise your acquisition, contact our Corporate and Commercial team on 01772 555 176 or email webenquiries@vslaw.co.uk