30 June always seems to come around sooner than you expect.
If you want to sell your business and have everything wrapped up in this financial year, then you have 3 weeks left! Let us take you through 5 important considerations to ensure you’re ready for a 30 June settlement.
1. What’s the deal?
When negotiating the deal and the price, you need to be clear what is included and what is not, before the contract is drafted. Some contentious items are:
- Is stock included in the price or in addition to the price?
- What about work in progress?
- Do you have a list of plant and equipment?
- What are your current staff accrued entitlements?
Also, is the price GST inclusive or exclusive? GST won’t be payable where the transaction is considered ‘the sale of a going concern’. This requires all things necessary for the continued operation of the business to be sold, and that the seller carries on the business as usual until settlement.
The main risk here relates to cash flow of the purchaser. If it is not the sale of a going concern, and suddenly they’re required to come up with an additional 10% on top of the purchase price at the last minute, it might cost you your deal.
2. The lease goes with the business… right?
Not automatically! In order to assign the lease to your buyer, you must obtain consent of your landlord. Hopefully you have a good relationship with your landlord and your rent is up to date. This can make a world of difference when time is of the essence. The key concern for the Landlord is making sure that the buyer is able to pay the rent, and checking takes time.
3. Searches and consents?
Suppliers, banks and any owners of leased equipment are likely to have registered security interests on the Personal Property Security Register (‘PPSR’) against the assets of your business, you personally or the entity that owns your business. You need to give clear title to the buyer for the assets you’re selling. Buyers usually demand all security registrations are removed for settlement.
Removing an interest often involves paying out any debt to the supplier or bank, or getting consent from the financier or lessor to the sale. Contacting and arranging the various releases of these security registrations can often take a few weeks, particularly if banks need to verify the amount of security they have for your loans. Doing a search of the register and starting early is strongly recommended!
Some contracts with suppliers and customers may also require the consent of the other party to the assignment of the contract to the buyer. This can hold up a sale if one of these contracts is the key business asset.
4. What about my staff?
Arrangements will need to be made between you and the buyer in relation to transferring employees and their entitlements. It’s important to note that the decision whether or not to transfer with the business and work for the new owner is one for your employee, not you.
You need to consider the financial effects of your employees’ decisions. You may be responsible for paying redundancies for staff that do not transfer, or there may be a financial adjustment on the purchase price to take into account that the buyer will take on the liability for the transferring employees’ entitlements.
You need to consider if there are key employees that are fundamental to the success and value of your business. Without these people, would anyone buy it? A buyer may require the sale to be conditional on key employees being willing to transfer with the business.
5. Licenses/Registrations, sign a form, done?
Maybe! The requirements for transferring/issuing statutory licenses such as a food business registration, an outdoor café permit or liquor licence differ.
Often, there are prerequisites such as police checks and responsible service of alcohol qualifications, and you need these before you even start filling in the transfer application! The transfer of the licence itself can take a few weeks depending on your circumstances.
Transferring trade marks, domain names and business names are usually straightforward provided everything is up to date at the applicable register.
How can MV help?
We’ve dealt with all of these issues (and much more) before. We know how long things take, and can help you to get the sale moving on time.
We have acted for buyers and sellers of businesses in many industries including restaurants, professional services, wineries, wholesalers, engineering firms and manufacturers.
For more information contact the Corporate and Commercial Team: