Let’s imagine the purchase of a business in the context of something we’re all familiar with – an evening out say.
Imagine, you’ve been to the cinema, or the pub, or even the theatre. What happens next? Well, eventually the goal is to get home.
Getting home is crucial, but it’s not something you will dwell unless it is catastrophically bad. The same goes for the final step in the purchase of a business.
In that context, the signing of the completion documents represents the curtain fall in the theatre, the credits at the cinema. You, as the buyer, need to bring it home.
So, what does a buyer have to consider once he has signed the sale agreement?
Well, here are a few points:
If you are buying a company or a limited liability partnership, it is crucial that you lodge all of the necessary forms (removing the previous directors (if appropriate) and changing the registered office of the company etc.). Depending on the transaction, you may also have to notify other regulatory bodies.
If you have bought a company by way of share purchase, you may need to pay stamp duty. If it is payable, this duty needs to be paid to HMRC on time, otherwise a late payment penalty may be imposed.
It is often overlooked but following a purchase, not only is it important to make sure that the public register at Companies House reflects the new structure of the company, it is also crucial to make sure that the statutory registers of the company are:
- in your possession; and
- have been updated.
In past blogs, we have mentioned the concept of warranties within the sale agreement (statements given by the seller confirming that a certain situation exists within the company (which may be qualified through the disclosure exercise)). In the post-completion period, the buyer should take some time to make sure that the warranties genuinely do reflect the state of the company. On this note, it is crucial for the buyer to be aware of any limitations (in terms of time and amount) which warranty claims are subject to, should they discover an inconsistency with the warranties.
- Completion Accounts – It is often the case that a sale agreement will include an obligation for completion accounts. These are accounts drawn up at, or shortly after, completion determining the final consideration. A buyer must consider how and when these are to be compiled.
Deferred Consideration – A buyer must also keep in mind any future payments they have to make to the seller:
- Does the sale agreement require the buyer to pay the seller at further points in the future?
- Is the amount that the buyer paid, or is going to pay, dependent on certain financial / performance targets of the business being reached?
- Is the buyer aware of what steps to take with these payments should the business not achieve the targets or the buyer has made a warranty claim?
If you are considering purchasing a business, please contact our corporate transaction team on 01383 721 621.
Steven Wicks – email@example.com
Angus McGuire – firstname.lastname@example.org
Alan Stalker – email@example.com