Are you facing the decision of finding a successor for your business and of successfully handing over the business \u2013 which is often your life\u2019s work \u2013 to the next generation? Early planning and ensuring the sale is legally sound are crucial, regardless of whether the business is sold within the family, to one or more of the company\u2019s employees (also known as a management buy-out), or to an external individual or company (also known as a management buy-in).<\/p>\n\n\n\n
Thorough preparation and planning for a potential sale are essential. In addition to the search for a buyer \u2013 which can sometimes prove challenging \u2013 a number of important legal issues relevant to the planned sale of the business must also be clarified<\/p>\n\n\n\n
The first critical decision to be made is whether the company should be sold as a whole or whether only a few assets or parts of the business should be sold. If the company is to be sold as a whole, the aim is to arrange a share sale (known as a \u2018share deal\u2019). In this process, the company\u2019s shares are sold and all contracts with customers and suppliers, as well as employment contracts, remain unchanged, as there is no change in the contracting party. This differs from an asset deal, in which individual assets (e.g. a property, trademarks, contractual relationships, an entire part of the business, etc.) are sold or transferred.<\/p>\n\n\n\n
In practice, an SME is often intended to be continued on a one-to-one basis, and a so-called share deal is therefore the obvious choice, possibly with a few adjustments (for example, should a privately owned plot of land be transferred), which would result in a hybrid form between a share deal and an asset deal, as, in addition to the sale of the company, there is a prior disposal of one or a few parts of the company\u2019s assets. A pure asset deal may take place if the aim is to sell a company\u2019s main asset or large machinery for which there will no longer be a need in the future. In this case, an asset transfer agreement is drawn up. An asset deal may also be considered if major legal proceedings are currently underway, making a potential share deal appear too risky. The \u2018remaining\u2019 company, which cannot be sold and for which there is no succession plan, would ultimately have to be wound up.<\/p>\n\n\n\n
A share deal and an asset deal may have different tax implications, which need to be examined in detail.<\/p>\n\n\n\n
Depending on the circumstances, it may make sense to carry out a business succession in stages, with a potential successor first acquiring a stake in the company. This is achieved by selling specific blocks of shares to the successor and by entering into a separate shareholders\u2019 agreement to ensure alignment of interests in the company\u2019s best interests. Alternatively, as outlined above, a phased sale of certain business divisions (parts of the business) to external parties, often competitors, may take place. In the event of a business takeover involving the transfer of employees, the legal requirements relating to business takeovers must also be examined and complied with<\/p>\n\n\n\n
Traditionally, in the context of planned business sales, confidential information is exchanged with prospective buyers, and initial negotiations are conducted based on a confidentiality agreement; these often culminate in a non-binding or binding letter of intent from the prospective buyer to the prospective seller. This is followed by a phase of in-depth analysis (known as due diligence) of the business being sold and further negotiations on the purchase price based on the results of the analysis.<\/p>\n\n\n\n
Due diligence refers to the \u2018thorough examination of the target company\u2019 by the potential buyer. It involves scrutinising the company or target company from a financial, organisational and legal perspective. The focus of the legal review is on identifying potential risks relating to existing contracts, existing liabilities, legal and warranty obligations, as well as potential liability risks for the company.<\/p>\n\n\n\n
As part of a legal due diligence process, the corporate structure, corporate governance and compliance issues, as well as any shareholder agreements, etc., are also examined.<\/p>\n\n\n\n
Following due diligence and further contractual negotiations, in a share deal the sale of the company takes place via a standard share purchase agreement, which sets out the sale of the shares on a step-by-step basis at the agreed purchase price. Further clauses in the share purchase agreement relate to warranties, taxation, the applicable law and the place of jurisdiction, and may include a reference to any shareholder agreements to which the purchaser is bound.<\/p>\n\n\n\n
In addition to the share purchase agreement, the necessary corporate formalities must also be carried out and the relevant documents drawn up as part of the completion process (resolutions of the general meeting and the board of directors, updating of the share register, etc.).<\/p>\n\n\n\n
In an asset deal, an asset transfer agreement is concluded which also contains the standard elements of a sale and purchase agreement. In this case, tangible or intangible assets (e.g. IP rights) of the company are acquired instead of shares. Depending on the scope of the assets being sold or the provisions of the company\u2019s articles of association, approval or a shareholders\u2019 resolution may also be required for the sale. Furthermore, a contract for the sale of land must be notarised.<\/p>\n\n\n\n
In the context of company sales, the terms signing and closing are frequently used. What do they mean? Signing means that, following a successful due diligence process, the parties reach an agreement and sign the contract, thereby entering into the binding transaction (the sale). Closing refers to the actual transfer of the company (the asset being purchased). The handover (the completion of the transaction) often takes place on a \u2018step-by-step\u2019 basis, which may be due to various reasons (e.g. pending approvals).<\/p>\n\n\n\n
Selling a business is a complex and potentially emotional process. It can be worthwhile to plan well in advance and involve specialist experts to ensure a successful sale. We would be happy to advise and guide you through each stage of the process to help you avoid any potential pitfalls.<\/strong><\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" Are you facing the decision of finding a successor for your business and of successfully handing over the business \u2013 which is often your life\u2019s work \u2013 to the next generation? Early planning and ensuring the sale is legally sound are crucial, regardless of whether the business is sold within the family, to one or […]<\/p>\n","protected":false},"author":8,"featured_media":8568,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[382,8],"tags":[],"class_list":["post-8833","post","type-post","status-publish","format-standard","has-post-thumbnail","","category-corporate-company-law-en","category-sme"],"acf":[],"yoast_head":"\n