BIZ.for.SALE   -   Businesses for Sale

IMPORTANT MATTERS TO CONSIDER
WHEN BUYING OR SELLING A BUSINESS

As a service to subscribers we have listed some important matters a buyer and seller of a business should consider in order to make sure they get what they bargain for. Of course, not all businesses are the same and, in any event, this summary is not intended to provide all that is essential for a satisfactory binding agreement, but rather to draw attention to some of the matters which should be considered. There is no substitute for proper professional advice when concluding what may well be one of the largest transactions you will ever enter into.

Goodrickes and Biz.for.Sale accordingly accept no responsibility for any inaccuracies in this document and the user, by proceeding further, hereby indemnifies Goodrickes and Biz.for.Sale against all demands, claims, costs, loss and/or damage which the user may suffer/incur arising out of or in connection with the use by the user of the information contained in this document.

Goodrickes Logo

 

1.   PARTIES TO THE CONTRACT
1.   Full details and contractual capacity.
 
2.   WHAT IS BEING SOLD
2.1   Business as a going concern with its name, goodwill and other assets.
2.2   Detailed inventory of plant, machinery, equipment, fixtures, fittings and furniture.
2.3   Rights in long term contracts such as leases or supply agreements.
2.4   Where stock is involved, date and manner of stocktaking, the method of valuation of stock and the right to reject damaged or obsolete stock.
 
3.   FINANCIAL ASPECTS
3.1   Amount of purchase price, date and manner of payment.
3.2   Where held in trust, provision for investment and entitlement to interest.
3.3   Special provisions for payment in instalments - interest and acceleration provisions.
3.4   Allocation of purchase price and tax implications.
3.5   Is transaction dependent on purchaser obtaining loan finance?
 
4.   VAT IMPLICATIONS - ZERO RATING
4.1   Registration of purchaser as Vat vendor - importance of timing.
4.2   Importance of "going concern" and "income earning activity" at date of possession.
4.3   Consequences of non-compliance - payment and recovery of Vat - cash flow implications.
 
5.   SECURITY
5.1   Where the full price is not paid on transfer of the business, is security to be provided.
5.2   Reservation of ownership, notarial bond, cession of book debts, suretyships.
 
6.   SECTION 34 OF THE INSOLVENCY ACT
6.1   Importance of advertising sale and its effect on existing debts and transfer date.
6.2   Failure to advertise can result in assets of the business being attached and sold for the debts of the seller six months or more after the date of possession, even after the purchase price has been paid by the purchaser.
 
7.   SPECIAL CONDITIONS
7.1   Transfer of trade and any other licences necessary to conduct the business.
7.2   Transfer of lease of business premises.
7.3   Transfer of franchise agreement.
7.4   Time for fulfilment of special conditions.
7.5   What will happen if a special condition is not fulfilled after the date of possession and the business has to be handed back to the seller.
 
8.   TRANSFER OF POSSESSION OF THE BUSINESS
8.1   Date of possession.
8.2   Passing of risk.
8.3   Insurance required and liability for premiums.
8.4   Special provisions for debtors and creditors accruing prior to that date.
 
9.   CONDITION OF ASSETS
9.1   Voetstoots.
9.2   Warranties regarding condition, ownership, insurance and formalities for transfer.
 
10.   ADDITIONAL WARRANTIES
10.1   Assets owned by the seller and not mortgaged or pledged or subject to hire purchase, suspensive sale or lease.
10.2   Turnover or profits.
10.3   Compliance with laws.
10.4     Staff salaries, bonuses, leave pay and so on to date of possession paid by seller.
 
11.   LABOUR RELATIONS ACT
11.1   Section 197 - Automatic transfer of employment.
 
12.   PURCHASER'S ACCESS TO RECORDS OF THE BUSINESS
 
13.   SELLER TO ASSIST PURCHASER FOR A PERIOD
 
14.   RESTRAINTS OF TRADE
  Particularly important where goodwill involved or price is based on future trading expectations and is in excess of net asset value.
 
15.   AGENT'S / BROKER'S COMMISSION
  Amount - Vat - accrual - indemnities.
 
16.   CANCELLATION CLAUSE
 
17.   ADDRESSES FOR SERVICE OF NOTICES
 
18.   SPECIAL PROVISIONS WHERE PURCHASER IS ACTING AS TRUSTEE FOR A COMPANY OR CLOSE CORPORATION TO BE FORMED
 
19.   WHERE A SELLER IS A COMPANY, CLOSE CORPORATION OR TRUST, SPECIAL REQUIREMENTS REGARDING RESOLUTIONS
 
20.   SPECIAL PROVISIONS WHERE THE BUSINESS ITSELF IS NOT SOLD, BUT THE SHARES OR MEMBERS OR OTHER INTERESTS IN A COMPANY, CLOSE CORPORATION OR TRUST WHICH OWNS THE BUSINESS ARE SOLD
20.1   Risks of undisclosed liabilities.
20.2   Importance of additional warranties.
20.3   Company or close corporation giving financial assistance.
20.4   Financial statements and adjustment account.

  Anything we left out, stuff you don't agree with.?
Good article, bad article.?
Please give us your comments and suggestions.  


[ Return to the Biz.for.Sale Home Page ]           [contact Email us ..... ]


Tel: 031 563-8344     Fax: 031 564-4928     Copyright 1998 - 2017©     info@bizforsale.co.za

 

  Find out just how much (or just how little) you know about buying a business! The most widely used strategy guide and reference resource for business buyers. Before you invest your savings to buy a business, shouldn't you first learn how to buy the right one?