So, You’ve Sold Your Business… What Now?

A lot goes into selling your business, and rightly so. Of course, the biggest focus is on what needs to be done to get the sale across the line (and money in the bank), but it doesn’t stop there. 

There are two different ways to sell your business. The first may be an asset sale, whereby selective assets that make up the business are sold. Otherwise, if your business’ trading structure is a company, you may sell the shares in the company, ultimately transferring ALL assets and liabilities to the purchaser of the shares.  

Depending on which method is utilised, there will be different matters to attend to but, ultimately, most should be detailed in the contract of sale. Of course, all businesses and contracts are different, so I strongly suggest going through the contract with a fine-tooth comb to extract a list of post-sale requirements and allocate responsibility and timing to this list as a checklist to tick off.  

Trust me, it’s surprising how often we find very important matters, that should have been addressed after a sale, that just get forgotten or ignored as people lose focus after the money has changed hands. However, failure to follow through can have some grave financial consequences.  

Below is a list of key or commonly recurring items we often see neglected or requiring attention. As noted, all businesses and contracts are different, and the list is not exhaustive. 

The main areas of concern are those that have ongoing liability attached. Accordingly, the first starting point is to review all warranties and indemnities and make sure you have satisfied or diarised to satisfy all requirements under these clauses. 

In the normal course of business, guarantees are given to many parties: financiers, suppliers, landlords etc. Make sure all pre-existing guarantees are cancelled preferably on or before settlement, or immediately thereafter. 

Vendor finance is becoming more prevalent with contracts of sale. If you are providing vendor finance make sure you have security and at least a Personal Property Securities Register charge. Additionally, ensure you diarise for all payments of principal and interest on due dates, and follow up and make sure you have a financial reporting regime in place to monitor the performance of the business until your loan is fully repaid. 

Make sure you understand exactly what the terms of restraint are and that you comply with them. Generally, are there any cascading down over time reducing periods and areas of restraint? This often includes restrictions on contacting ex-staff, suppliers, and clients as well as your ability to operate what could be deemed a competing business. 

Sick leave entitlements are a difficult one. Although there is no obligation to pay this out, for reasons of goodwill to the vendor or former employees, funds are often held on deposit for an agreed term to cover any sick leave that would have otherwise been covered under the former employment arrangements.  

This is generally a short-term provision to provide an incentive for staff to stay on with the new owners. However, this has a limited timeframe and, after this timeframe, any uncalled amounts will be released to the vendor. Make sure you diarise for this date to recover. 

Similar to above, sometimes amounts are held in trust to cover future taxation and other obligations that could not be accurately calculated on the day of settlement. Diarise for release of unutilised funds on the specified date and make sure all taxation obligations relating to pre-settlement date obligations are paid on time, as they are still your responsibility. 

Make sure all addresses or other contact points are updated. If you owned the business for some time, it may well have been your primary address for most correspondence. 

Finally, if the company is being sold, ensure all ASIC records are updated to remove you as a director, officer of the company shareholder etc. 

As you can see, there is still a lot to do after settlement. Make sure you are meticulous, develop checklists and diarise key dates to avoid loss of what you are entitled to. If you need help or have any enquiries to do with the sale of your business, please don’t hesitate to get in touch with us today.