By James Dent
Wilson Browne Solicitors
WHEN selling a business there is often a worry that even after the deal has been finalised the outgoing owner can still find people metaphorically knocking at their door for problems that initiated during their ownership. There are three main stages where the seller can reduce the risk of this happening:
Before the sale starts
In the lead up to a sale it is always advisable for a business owner to identify potential areas of risk which might put off a potential buyer.
Tackling these issues head-on before the buyer is even aware allows the seller to remain in control and reduces the chance they will be out of pocket later down the line. Examples of things to consider include resolving on-going disputes and ensuring all policies (such as GDPR compliance) are up to date.
During the sale
The seller has the opportunity during a sale to disclose potential areas of risk to the buyer and, therefore, limit liability. Withholding information is a criminal offence involving non-disclosure of information relating to a share sale and warrants a potentially unlimited fine and up to seven years imprisonment. It also leaves the seller exposed to a claim by the buyer.
If the seller is truthful then he/she should be able to limit their liability for any matter arising after the deal is completed.
The best approach? Tell your solicitor all of the issues relating to your business and they can then assess the level of risk for you and make disclosures accordingly.
After the sale has completed
Business sale agreements may contain provisions that the seller is required to comply with once the business has been sold. A prime example of this would be to not make derogatory comments about the buyer or the business that they have just bought! Although this might seem like common sense, it is not always followed and can lead to sellers being sued.
The Company Commercial Team at Wilson Browne Solicitors recommend you engage with your advisers, both accounting and legal, as early in the process as possible: this helps to identify areas of concern and ultimately ensure a smooth, risk free sale.
For more information, contact James Dent at Wilson Browne Solicitors on 0800 088 6004 or visit www.wilsonbrowne.co.uk