Business Sales and Purchases

• You must carefully undertake proper due diligence and independently verify all matters, representations and agreed terms. Have an accountant peruse the books of the business and GST returns for the past twelve months or longer. Watch the business being operated for at least two or three weeks. We recommend that you include a due diligence clause to the terms of the Agreement so that you can collect all relevant information, consult relevant professionals for advice and fully investigate matters before you become locked in to an agreement.
• A purchaser will have to ensure there is a comprehensive list of plant and equipment and that the same will be in working order, and not subject to any hire purchase or other finance at settlement.
• To avoid GST on the transfer of a going concern both parties must be registered for GST at the time of supply. It is important for the purchaser to ensure that GST registration is completed at the appropriate time.
• The terms and length of any lease needs careful consideration. Firstly the new purchaser will require the Landlord’s approval for the transfer of the Lease. We can check carefully for any unusual terms such as a demolition clause which would allow early termination of the Lease by the Landlord, or requirements for maintenance of the building itself. There are many issues to consider. Specifically you should not spend any money on the business or premises until you have the landlord’s written approval to the lease transfer. The landlord will also need to consent to any structural changes to the premises, types and location of signage etc.
• Ensure that the vendor signs appropriate restraint of trade terms so that he can not take customers or compete with you after the business is transferred to you. Are there any key employees who will be leaving (or might leave) and cause a problem by taking away business or starting up in competition? Peruse all employment contracts. Will you require the vendor to terminate some or all current employees?
• Visit the Council to view the property records and to see if they have any special requirements, e.g. Food Licence. If you intend to make structural alterations, then in addition to the Landlord’s consent you are likely to need a building consent.
• Are you to get the benefit and ownership of a website, all licences and software?
• Do you need to make an application for any licences (e.g. On-Licence for alcohol)?
• Is the rent too high? What are neighbouring businesses paying . If adjacent rents are higher then you are likely to suffer a similar increase at the next rent review. Maybe the landlord will give you a rent holiday for a month or more if you are re-fitting or doing the premises up. When is the next rent review in the Lease? Does the lease have adequate rights of renewal?
• Understand who the suppliers are for the goods or materials that the business uses. Talk to them to see if they have any special requirements such as a contract.
• Ensure the vendor gives appropriate warranties for the turnover of the business for at least the last twelve months.
• If you are to be in a mall or foodcourt does the lease give you any protection in regard to exclusivity so that no competitors are allowed? This can be very important. Even if you are in a small block of shops the landlord may agree to no competitors.
• What are the outgoings payable under the lease and how much are they. (Rates, building insurance etc.) Is the building part of a Body Corporate and what are the fees. Ask for Body Corporate minutes for the past two years.

In regard to a sale of a business our work for you may include:

• Drafting of the Agreement for Sale and Purchase or review of a signed Agreement.
• Ascertain conditions and chase on payment of deposit.
• Obtain from purchaser their business CV with assets and liabilities statement for approval of the landlord.
• Review current lease documents.
• Push agreement to unconditional status. Receive deposit.
• Search Personal Property Security Register to facilitate release of securities in time for settlement.
• Obtain rent and outgoings figures for apportionment with purchaser and prepare settlement statement.
• Complete assignment of lease and settlement.