07 May, 2021
Properly preparing your business for sale takes time, which means you need to start planning for a sale well in advance. However, you never know when an offer might come along that is too good to pass up - would your company be in a position to be sold at short notice?
If not, this is the best time of the year to give your business a Spring clean. Most of the steps you will take in preparation for sale are, in fact, just good practice that we would advise company owners to carry out regularly. Here we set out a few of the main areas which can trip up sellers during the due diligence process, and which can be remedied in advance to make the sale process go far more smoothly.
It is a legal requirement for the majority of limited companies to keep an update register of various matters concerning the company, such as the shareholders, directors, company secretary, persons of significant control (PSCs), share transfers and allotments and charges. We often find that companies have not kept their statutory registers up to date, and many don't even know if they have any, which can cause significant delays upon sale of the company. When buying a limited company, the statutory registers are the definitive record of the nuts and bolts of the company, and as such a buyer require a seller to reconstitute the registers from scratch prior to completion, which can be a time consuming process.
Other common related issues include companies not keeping a proper record of shareholder resolutions and/or board minutes, as well as stock transfer forms and/or share certificates not being retained. When documents, such as the share certificates, are missing, sellers are often asked to provide the buyers with indemnities at the point of sale - which is one extra obligation that could have been avoided.
For most businesses, their workforce is their biggest asset they have. Ensuring that all employment documents are correct and up to date can take another significant chunk out of the due diligence process. It is best practice to review your employment contracts, staff handbooks, pension provision and other employment documents and processes at least once a year to ensure that they remain current with the fast paced change of employment law.
Are all your customer and supplier contracts up to date? If not, do you know the basis with which you trade with your key business counterparts? Are your terms and conditions of trade up to date, and enforceable? This is another key area where you can save time, and also limit exposure to risk, by taking the time to review the position.
One area which can significantly slow down a sale process is the property assets of a company. Does your business own or rent premises? If so, is everything up to date, have all rents, charges, taxes and other expenses been paid? Is your lease current, or has it expired? Do you know where the deeds are to your properties? Are they owned by the correct corporate entity? Dealing with rectification of property issues in a sale can take a lot of time and money at a time when your focus should be elsewhere. Carrying out a Spring clean of your property portfolio, and keeping up to date with it, can save significant time and stress in the long run.
Does your business own or use any IP? Most businesses do, even if it is just a website! As with many other areas of your business, an audit on at least an annual basis of your IP is essential to a smooth transition to new ownership. Does the company own the domain name for your website, or is it in fact owned by the employee who registered it in the first place when you were starting out? Are your registrations and licences current and up to date?
We can assist with all of these matters, and would be happy to meet with you to discuss how we can help give your business a Spring clean, just in case that too-good-to-turn-down offer lands in your inbox sooner than you expected!