Understanding contracts when buying or selling a business

Before you sign, you need to double-check the details written into the final contract and its accompanying documents. Once you have signed, there is a further list of tasks you need to do before you can complete the sale.

Checklist for selling or buying a business

Before you sign a contract, you should:

• review your aims and how well this contract meets them
• make sure all the agreements made during the negotiation are included in the contract
• make sure there are no vaguely worded provisions, exclusions or limitations in the contract which could give rise to problems later
• if you are buying, ensure you have non-compete agreements in place
• check the financial and tax details again with your financial adviser
• check your obligations and the wording of the contract and other agreements again with your solicitor
• ensure all the necessary documentation and signatories are present at the signing session
• establish a schedule of tasks for completing the sale, making the handover, continuing the business and meeting future obligations
• make sure you have copies of all negotiated agreements kept in a safe place
• have informed and consulted affected employees in compliance with the Transfer of Undertakings (Protection of Employment) (TUPE) regulations

After you have signed a contract, make sure that:

• all others who need to sign have signed the relevant documents
• your solicitor has all the original documents you need to keep
• the buyer's solicitor has copies of all the documents and will present a digital version to both the buyer and seller
• the financial agreements are put into effect
• the buyer's solicitor makes the change of ownership return to Companies House
• in asset and goodwill deals, the seller deregisters and the buyer registers for VAT
• the seller - and the buyer if applicable - continues to inform and consult affected employees in compliance with TUPE as necessary
• both sides are ready for the handover and for informing clients, suppliers, etc
• the business operates smoothly up to and after the sale is completed