Buying A Business - The Heads of Terms - Part II
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27 October 2011 By Inam
Ali
This is part of a two-part guide that attempts to provide a brief
outline of the Business Heads of Terms. In this article, we will take a
look at the terms that deal with giving the purchaser an exclusivity
period, preconditions that can be agreed, and warranties and
indemnities that can be given by the seller to the purchaser.
Exclusivity
Consider agreeing a period of exclusivity which prevents the seller
from dealing with other potential purchasers for a certain period.
It may be possible for the purchaser to agree that his or her legal
fees will be paid by the seller, if the seller pulls out of the
transaction within the exclusivity period.
Preconditions
If there is any specific advantageous event which the business is
anticipating, then the purchaser could set it as a precondition.
Reaching a minimum level of audited profits, the sale of an asset, or
firm orders, are common examples. Where the precondition is not met,
then the purchaser does not have to complete on the transaction.
Warranties and Indemnities
The parties should agree any warranties and indemnities the business
sale will be subject to.
A warranty is a written statement by the seller which confirms certain
key information about the business. For example, the seller could give
a warranty that there are no legal claims against the business.
Indemnities are a commitment to reimburse a person (in this case, the
purchaser) in full, if a specific event takes place. For example, the
purchaser could insist the seller gives an indemnity, to cover any
undisclosed tax liabilities of the business that relate to the period
prior to the sale completion date.
Inam Ali is a Solicitor
at Lawdit, specialising in Commercial and Intellectual Property Law,
and can be contacted via email: inam.ali@lawdit.co.uk
If you would like assistance with
buying or selling a business, then please contact our Commercial
Department and speak to one of our solicitors who will be happy to
discuss this with you.
About the Author
Lawdit
Solicitors offer services and advice for litigation,
commercial contracts, Intellectual Property and IT legal agreements. We
are experts in commercial law with a heavy emphasis on Intellectual
Property, Internet and e-commerce law. Lawdit is a member of the
International Trademark Association, the Solicitors' Association of
Higher Court Advocates and we are the appointed Solicitors to the
largest webdesign association in the world, the United Kingdom Website
Designers Association.
