November 26, 2018

Buy and sell deals

Most people spend a lot of time and effort in researching, establishing and operating their biggest asset, a business. Many entrepreneurs also regard it as the source of their retirement and income for their families when they can no longer run their business.

Experience has shown that only a limited number of business owners actually do something about the practical consequences of unexpected death or disability:

  • How long will it take to find a willing buyer?
  • Will the family receive a market-related price for their business interests?
  • How will it affect staff members and creditors as well as the continued existence of the business?

The solution is a business continuity plan (also known as a buy-and-sell agreement).

Solution

The business owner finds a person / persons who understand the business and who are interested in taking ownership. He / she will then enter into an agreement with those persons explaining the terms and conditions of a sale of interests that he / she has in the business at a future date.

Examples of potential buyers are current co-owners, staff members or even competitors. It is therefore possible that a sole proprietor can also enter into such an agreement. Such a contract can be concluded orally. Because it may be difficult to prove the terms later, we recommend that such an agreement be put in writing, where possible. Basic requirements for a valid contract It is a contract of sale and purchase.

As such, it must contain the following specific terms and conditions:

  • Full details of seller
  • Full details of buyer
  • Description of item (s) to be sold and purchased
  • Price of business interest and how it will be financed
  • Under which circumstances the contract can be executed.