When considering the purchase of a business, you should involve a lawyer in the process to achieve better outcomes. While it may not be a legal requirement, having a lawyer can provide valuable guidance, protect your interests, and ensure a smooth transaction. Here are some reasons why involving a lawyer is beneficial: –
- Legal Expertise: Buying a business involves many legal considerations, including contracts, agreements, licences, permits, intellectual property, and potential liabilities. A lawyer with experience in business acquisitions can help navigate these complexities, assess risks, and provide professional advice tailored to your situation.
- Due Diligence: Conducting thorough due diligence investigations is crucial before purchasing a business. A lawyer can assist in reviewing contracts, leases, employee agreements, and other pertinent documents to identify any potential issues or risks and work with your accountant’s review of financial statements and tax records. A lawyer can also help negotiate and address concerns arising during your due diligence process.
- Contract for the Sale and Purchase of a Business: The purchase agreement is a critical document that outlines the terms and conditions of the transaction. A lawyer can draft or review the agreement to ensure it protects your interests adequately. They can help negotiate critical provisions, such as purchase price, payment terms, allocation of assets and liabilities, representations and warranties, and any specific contingencies or conditions. The often-used standard form of the contract (Contract for the Sale and Purchase of Business, 2021) provides a good picture of the most fundamental issues involved. The basic legal necessities are all there, but your lawyer can negotiate changes on your behalf. Recent amendments of legislation – e.g. the Personal Property Securities Act 2009 and the Fair Work Act 2009 – which may affect a sale or purchase are reflected in the most recent version.
- Structuring the Deal: Working with your accountant, a lawyer can advise you on the most appropriate legal structure for your acquisition and optimise the structure of your commercial deal, considering factors such as tax implications, liability protection, and future growth plans.
- Regulatory Compliance: Depending on the industry type and location, there may be specific regulations, licences, permits, or approvals required for the business. A business lawyer can guide you through the compliance process to help you meet these often complicated legal requirements.
- Premises lease: Typically, purchasing an existing business involves taking over the business premises, whether a shop, office or warehouse and assigning the existing commercial or retail lease to you. Alternatively, you, the Vendor and the Landlord may decide that you enter into a new lease with the Landlord upon purchasing the business. An important document to review for retail premises is a Lessor’s Disclosure Statement required by the Retail Leases Act 1994 NSW, and the Retail Leases Regulation NSW 2022, which is supposed to set out the existing lease’s critical commercial aspects. You should also consult a lawyer if the business type is covered by the Act’s definition of a “retail shop”, affording you as a tenant the better protection given by the Act compared to standard commercial leases.
- Employment obligations: Recent amendments to the Fair Work Act 2009 (Cth) and other legislation regarding employee entitlements when a business is sold mean that the standard form contract has been updated, with much more detail about employees of the business being specified (Contract for the Sale and Purchase of Business, 2021). Changes include purchase adjustments for accrued untaken personal or ‘carer’s leave and the years of service a purchaser is bound to honour regarding various types of leave. Some leave entitlements for transferring employees must be honoured under the Fair Work Act, but with others, the parties can agree to either the Purchaser or seller taking responsibility. This level of complexity will require legal advice.
- Franchises: The business you buy may be a franchise, so the Franchising Code of Conduct and the Competition and Consumer Act 2010 (Cth) will affect the transaction. These reflect recent efforts by the government to empower franchise purchasers to obtain proper, realistic information from franchisors and not be forced into unfair supply contracts.
- Completing the Transaction: When finalising your purchase, a lawyer can ensure that all legal documents are correctly prepared, executed, and recorded. They can oversee the transfer of assets, assist with financing arrangements, and handle any necessary registrations.
Don’t hesitate to contact us for a free initial discussion about the legal aspects of your purchase of a business.