• Selling
• Buying
• General

Selling

Do I have to tell my employees about the sale?

The new Transfer of Undertakings (Protection of Employment) Regulations 2006 (known as TUPE) applies where the assets of a business or part of it are acquired by a buyer who then takes over the running of the business. The regulations protect the rights of the employees of the business who are deemed to be automatically transferred to the buyer along with the other assets. The seller has a duty to consult with all employees about the sale of the business as soon as reasonably practicable. Failure to do so can result in significant financial penalties for both the seller and the buyer. Recent changes in the law mean that a seller is now also required to provide the buyer with 'employee liability information' about employees in advance of the sale. A buyer will be entitled to compensation from the seller for breach of this obligation of up to £75,000.

Read more about TUPE here.

Will I still be liable to creditors of the business after it has been sold?

Generally in a business transaction the liabilities are not included and will remain the responsibility of the seller. The seller is responsible for all liabilities up to the completion date, thereafter, the buyer is responsible. Sometimes it may be necessary to include some liabilities within the purchase e.g. outstanding finance on equipment which is being transferred to the buyer. The buyer will be keen to ensure that the creditors are paid as soon as possible in order to protect the goodwill of the business.

What happens to the book debts of the business?

In most cases the book debts will be retained by the seller. If the seller thinks he will have problems collecting the book debts after completion, for example where the employee responsible for debt collection has been transferred to the buyer, the parties may agree that the buyer will collect the debts as the seller's agent and pay any monies collected to the seller.

Where will I find the title deeds to the property?

Please see the glossary title deeds.

Can I keep the financial records and books of account?

From 1 September 2007, the seller is required to retain the business records. However, the seller must make available to the buyer information necessary for the buyer to comply with his obligations under the VAT legislation.

What documents will I have to hand over to the buyer at completion?

• Signed sale agreement
• The title deeds of any property being sold
• Financial records and books of account (if not being retained – see Can I keep the financial records and books of account?)
• Employee records, national insurance and PAYE records if applicable
• Any releases of charges over the assets of the business
• Any licences to assign
• Any other documents required by the buyer to run the business

Buying

What searches do I need?

If a property is included in the transaction we advise that as a minimum the following searches are carried out (if you are buying with a mortgage these will be a requirement of your mortgage lender):

• Local Authority Search
• Water and Drainage Search
• Environmental Search

The following searches are also advisable:

• Coal Mining Search
• Commons Registration Search

There are many other searches that may be relevant depending upon the location, type and history of the property.
If the seller is a limited company we also advise that a search is carried out on the company to ascertain the identity of its directors and also whether there are any charges registered over its property.

What licences do I need to run the business?

Under the Licensing Act 2003 all businesses which sell/supply alcohol and/or which serve hot food to the public on or from the premises between 11pm and 5am (such as late night takeaways and cafes) must apply for a premises licence. If alcohol is being sold/supplied the designated premises supervisor must hold a personal licence also.
Personal licences cannot be transferred but must be new applications by the designated premises supervisor. To avoid the need for a new personal licence application the buyer could ask the current designated premises supervisor under the current premises licence to remain on the premises licence.
Other types of licence may be required depending upon the nature of the business.
Read more information about Fish & Chip Shop Establishments

Do I have to take on the seller's employees?

The new Transfer of Undertakings (Protection of Employment) Regulations 2006 (known as TUPE) applies where the assets of a business or part of it are acquired by a buyer who then takes over the running of the business. The regulations protect the rights of the employees of the business who are deemed to be automatically transferred to the buyer along with the other assets. The employees will transfer to the buyer under the same terms of employment as before. Any changes to their terms of employment following the purchase will not always be legally binding. The buyer will also be subject to the same pension contributions (if applicable) provided they do not exceed a prescribed limit. The buyer cannot terminate employment if it is connected to the business purchase without being subject to claims for unfair dismissal. The only way to limit liability for these claims is to ask the relevant employee to sign a compromise agreement.

How can I protect the goodwill of the business after completion?

This is essential if the business has built up a good reputation, the trade name is well known and/or the business has many repeat customers. Protection is often achieved by the inclusion of covenants within the sale agreement which restrict the activities of the seller for a certain amount of time after completion. Example restrictions include not allowing the seller to:

• Set up a competing business within a certain area
• Approach or entice away current customers, suppliers or employees
• Disclose confidential information relating to the business
• Use the trade name in connection with any similar business

It is vital that all such covenants are reasonable or they may be difficult to enforce against the seller.

Can I take over the seller's existing contracts with suppliers/customers/agents?

If agreed by all parties concerned this can be done either by assignment or novation.

How much SDLT will be payable?

For freehold properties the SDLT is based on the apportionment of the price for the property as part of the purchase price for the business. SDLT is only payable on commercial premises above the value of £150,000. The rates of SDLT are as follows:

£0-150,000	0%
£150,001-250,000	1%
£250,001-500,000	3%
over £500,000	4%

SDLT is calculated differently for leasehold properties and depends on the premium paid for the lease, (if any), the rent paid and the term of the lease.
In all cases SDLT must be paid within 30 days of the completion date.

General

How long will it take from submitting an instruction form to completion?

In most cases completion can be achieved within 6 weeks of instruction. This is however dependent on there being no undue complications or delays. We are only able to work at the pace of other solicitors, agents and any other third parties.

How much will it cost?

Please complete a new quote for your particular circumstances.

Who will prepare the sale agreement?

This is usually prepared by the seller's solicitor as the seller will have more information about the business and its history.

How is stock dealt with?

It is usually impossible to determine in advance what the value of the stock will be at completion. In most cases the stock will be valued separately in between exchange of contracts and completion (or, where exchange and completion are simultaneous, immediately after completion) and paid in addition to the purchase price. Alternatively a value for stock may be agreed and included in the purchase price. The stock could still then be valued at or before completion with any difference payable by or to the buyer.

Is VAT chargeable/payable?

If a business stops trading before it is sold there is deemed a taxable supply of all goods then held by the business. However, if the assets of a business are transferred as a going concern, there will be no supply of goods for VAT purposes and no VAT will be payable on the purchase price. To qualify as a transfer of a going concern the following conditions must be met:

1. the business must be capable of continuing to trade and operating independently;
2. after completion, the buyer must use all the assets in the same kind of business as the seller previously used them; and
3. if the seller is registered for VAT, the buyer must also register within that VAT quarter.

Read more about VAT here

Who will pay the landlord's charges?

Generally the buyer with pay for any costs of the transfer of the lease or the grant of a new lease including the landlord's solicitor's fees if applicable.