Buying and Selling a Business in Jersey
Whether you are the buyer or seller, having an experienced business lawyer like Parslows on your side early in the process can save you time, money and frustration in the long run.
The sale or purchase of a business can be a complex process. Selling or buying a business in Jersey is much more than ticking a few boxes and filing in a few forms. The consequences of not getting it right can be problematic and lead to disputes or financial loss. Lawyers are necessary for multiple reasons, but their miost significant use when buying or selling a business in Jersey is to ensure the transaction is valid, legitimate and legal.
While a smaller law firm by comparison to other Jersey firms, at Parslows we can draw on our extensive experience in business sale and purchase transactions across a broad range of Jersey businesses and industries. Parslows lawyers are high-calibre, having worked or been partners in larger law firms. You get the expertise and commitment to your transaction.
Questions to consider before buying a business in Jersey.
- Why is the business for sale?
- What is the business’s current financial state? What does its future financial status look like? Does the business have any material outstanding debts?
- Are there any employees? Are there or have there been any material issues with employees?
- Does the business hold a lease? If so, how long is left on the lease and can the lease be renewed?
- Does the business own any intellectual property? If so, do ownership rights need to be transferred to the new business owner? What contracts (if any) is the business currently involved in?
- Are there any key suppliers or customers, and if so, what would be the impact if they stopped being key suppliers or customers?
- Are there any pending lawsuits or other liabilities against the business or its owners?
What are heads of terms?
Heads of Terms set out the main terms agreed in principle between the parties to purchase a business.
What is a share purchase agreement?
A share purchase agreement is an agreement that sets out the terms and conditions relating to the sale and purchase of shares in a company. The seller(s) agrees to sell a specific number of shares to the buyer for a specified price together with other relevant terms and conditions of the sale.
What is an asset sale agreement?
An asset transaction involves the purchase or sale of some or all of a company’s assets, such as equipment, inventory, real property, contracts or lease agreements. An agreement similar to a share purchase agreement will be provided but the agreement’s subject will be assets, not shares.
What is legal due diligence?
This is a fact-finding exercise about the business that is being purchased; its accounts, employees, clients, assets and liabilities. This may require a multi-professional team to advise on the various issues. It is essential to follow a due diligence process to ensure the purchaser can evaluate the pros and cons of purchasing a business. Due diligence is relevant to both seller and buyer and can take time to deal with.
What are representations, warranties and indemnities?
Representations are assertions of fact that persuade another party to enter into a contract. A representation is typically information used by a party to decide whether to enter into a contract.
Warranties are essentially promises by the seller to the buyer as to the accuracy of the information provided during a due diligence process.
Indemnities are promises by the seller to make good potential losses that may be incurred by the buyer.
What is meant by the term ‘conditions precedent’ in a share purchase agreement?
A ‘Condition Precedent’, is a condition agreed by the parties that must be satisfied, or waived, before the agreement may complete. In general terms the failure to satisfy a ‘Condition Precedent’ typically gives the other party the right to abandon the transaction without liability.
What are the typical issues encountered when buying or selling a business in Jersey?
The typical issues associated with buying or selling a business in Jersey depends on several factors, including (but not limited to):
- The nature of the industry within which the business operates
- The type and size of the business
- Statutory and other regulatory requirements
- The size of the business
- The business premises
- The business assets and liabilities
- The nature of operations
- The employment arrangements
- The extent to which the business utilises land
- The relevance of intellectual property to the business
Are restrictive covenants important to include in a share purchase agreement of a business?
This will very much depend upon the nature of the business being purchased. As a buyer, you must restrict a seller from competing against you as this could harm your business. A restrictive covenant would only be enforceable by the Royal Court if it does no more than adequate to protect the business interest. In other words, it must be reasonable.
Do I need a lawyer to buy a business?
When considering buying an existing business, we recommend consulting legal advice. A lawyer will make thorough inquiries on your behalf about all factors concerning the sale to protect you throughout the transaction and review the purchase contract. Proceeding without legal advice for buying a business could impact your purchase and ultimately on your profits. There is a lot to consider about exactly what you are buying, so clarity in the documentation is crucial. If employees are staying on, you’ll need to approach that appropriately to ensure you are not left with a payout liability as a seller or liability as a purchaser.
Do I need a lawyer to sell a business?
Selling a business can be a complex process, and we recommend legal advice to help you from the negotiation stage right through to completion of the sale. For example, if a potential buyer has due diligence queries that you do not adequately address, this could affect the sale further down the line. Missing important steps like this can result in a claim for breach of a warranty and/or misrepresentation. Seeking legal advice for selling a business can help avoid costly issues like this, as lawyers will have a thorough knowledge of the sales process.
Do I need to review the business lease when I buy a business?
If you are buying a business that leases existing premises, An experienced lawyer must review the lease. This will be the case whether you are buying the shares in the company business or whether the seller is assigning the business lease. It might be the case that the lease you are about to take over contains unfavourable terms that you wish to vary, such as the rent review process, termination rights, indemnities and lease terms and options.
What about regulatory compliance when buying a business in Jersey?
When buying a business, it is imperative that you make sure you have (or obtain) all necessary regulatory licensees, authorisations and permits required to conduct business legally. These all need to be reviewed to ensure that when you complete the transaction you can commence business smoothly.
Parslows have been supporting the Jersey business community, particularly small to medium businesses since we first started trading. In that time have assisted hundreds of businesses with buying and selling businesses. We have acted in all Jersey business sectors, including:
- Fishing and farming businesses
- Restaurants, cafes and hospitality businesses
- Lodging Houses and Hotel businesses
- Retail businesses such as florists, cycle shops and supermarkets
- Care homes
- Taxi firms
- Logistic businesses
- E-commerce and other Internet-based businesses
Whether it’s the sale of a large company or the purchase of a small family business, the needs are the same — focused lawyers who understand the issues and are attentive to your needs. You really cannot afford to buy or sell a business without the assistance of a lawyer.