Thinking of buying a business? PBL 5 Key Tips & Traps in the Initial Purchasing Process!

4 min read

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Buying a business may seem simple enough but, unlike the purchase of your home, there is no cooling off period or specific statutory protection so you need to make sure the purchase is handled correctly. The old legal maxim “Caveat Emptor“ (Buyer beware) applies to these transactions. At PBL we are increasingly receiving instructions in the sale and purchase of businesses particularly as small business people emerge from the global financial crisis and potential changes in the duties law.

So what are the 5 essential tips and traps that you need to be aware of?

  1. The devil is in the detail

Normally the vendor’s solicitor will prepare a contract and submit it to you (or your solicitor) for your consideration. It is important to review the contract very carefully to make sure it is EXACTLY a reflection of the bargain you have struck with the vendor. If there is something in there which is not agreed or something not in there that should be, make sure you or your solicitor negotiates the necessary changes required to give full effect to the terms of the bargain. If you leave it out then you cannot go back and seek amendments later on.

  1. Do your due diligence

It is basically fundamental to undertake a range of inquiries not only about the business but also about the vendor. Stock standard inquiries and searches should be launched to ensure that the vendor owns the business, that the assets of the business are unencumbered, that Intellectual Property going with the sale is registered in the vendor’s name or if not the arrangements that are to be made to assign the rights to it, that there are no insolvency issues so far as the vendor is concerned. In particular with the advent of the Personal Property Security Legislation it is important to undertake the relevant searches of the vendor to ascertain whether or not there are security interests registered against the vendor and appropriate clauses inserted in the contract to have them discharged.

  1. Plant and equipment and practical inspections and reports

Many businesses will be sold with plant and equipment of various kinds. It is important to check the list of these assets carefully both from the contract and personally by attending the business premises at the time you receive the contract and AGAIN BEFORE exchange (and again prior to settlement). Make sure you get all relevant serial and registration numbers of all the plant that bears such details for a variety of reasons including checking encumbrances. If you are not experienced or have knowledge of the mechanics or functioning of the plant it is very prudent to engage experts to provide relevant reports to you PRIOR to exchange so you can, if you wish, seek changes to the contract.

  1. Are there any issues with the landlord?

If the business is being run from premises then it is of utmost importance to engage with the landlord early on to make sure you will be accepted as a tenant either by way of a new lease or transfer of the existing lease. Time and time again completion of business purchase are delayed because of a lack of attention to get on the front foot and arrange the leasing terms well in advance even of exchange. Landlords will want to do their own due diligence and review your financials and may well require references from suitably qualified people to vouch for your talents so don’t leave it too late.

  1. Business names, websites, domain names and intellectual
    property

Although this is a favorite topic of mine, I cannot stress too much how important it is to make the necessary arrangements about these business assets. You should be aware that IP (Trade Secrets, Copyright, Trade Marks, Designs and Patents) is not just “purchased” but in general must be transferred or assigned to the purchaser normally with a separate document and this should be covered in the contract. Transferring business names is now more problematical as ASIC has taken over control and there is a completely new legal paradigm and culture of dealing with them which requires expert advice and a need to also seek relevant special conditions to be inserted in the contract. Problems of a lesser nature for domain names also require early intervention. Checking ownership of the copyright in websites is a must as well.

There are other matters that could be the subject of consideration but these are certainly the essentials BEFORE you exchange.

More about the process of the business transaction post exchange in my next e letter.

If you need help in buying a business please contact us on 4305 3500[/vc_column_text][/vc_column][/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” width=”1/1″ tablet_text_alignment=”default” phone_text_alignment=”default” column_border_width=”none” column_border_style=”solid”][recent_posts style=”default” category=”all” columns=”4″ posts_per_page=”4″][/vc_column][/vc_row]

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Picture of Authored By<br>PBLTeam

Authored By
PBLTeam

Director Lawyer, PBL Law Group

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Jye Hall
Anita Bradley has been an absolute dream to deal with. Anita's conveyancing skills and knowledge knows absolutely no boundaries along with her effective communication skills which has made selling and buying a completely stress free exchange for us. We recommend PBL Law to everyone looking for outstanding service. We will definitely be returning clients.
Kushlan Aluwihare
PBL Law Group were fantastic. Anita from PBL worked with us closely during our property search and made the exchange and settlement process smooth and stress free. Highly recommended.
Gail Whitford
PBL handled my late mothers estate, they were very obliging and patient with any and all questions that we had, thank you to David , Sharon and the other staff that we dealt with, everyone was so easy to talk to and friendly .David came to the home where my Mother was living and helped her to get her will in order, Sharon helped us through the process of executing her wishes when the time came even doing a house call which was so much easier, thank you all so much
S M
I have experienced an excellent service from PBL (especially from Anita) during the sale of my recent property on Central Coast, and during the purchase of our current property in Sydney. Throughout many challengers, especially with the sale, Anita presented her very professional and knowledgeable conveyancer, positively solving all obstacles. "Above and Beyond" Award going to Anita!!! :-)
Amanda Reitzin
The five-star reviews are well-deserved. I needed a motion and a bylaw drawn up for urgent repairs of my strata unit and the AGM was in two weeks' time. My solicitor was friendly, efficient, knew what documents to ask for, and had all the paperwork prepared well within the timeframe. She also took the time to run through all the legalese and the different possible scenarios with me to make sure I understood. I am so glad to have found this firm and I will not hesitate to use their services again in future if the need arises.
Ricky Cooper
Anita is amazing! So attentive, approachable and communicates everything every step of the way. I have now bought and sold property with Anita and I cannot recommend her highly enough.
Ron Thomsen
Our Commercial Property conveyancing was handled very professionally. Anita’s experience and responsiveness was an asset in this transaction.
Trace M
I am so grateful for Anita Bradley from PBL Law Group helped me with this property settlement, she has went above beyond to ensure I understand everything because of our deafness. I will recommended Anita or their team. Thank you so much for all the hard work you have done for us.
Tricia Wheatstone
For almost 18 months I have been a client of Alex Ilkin. Alex is very knowledgeable and professional and has consistently provided me with thorough, honest and well set out advice, including steering my case through appeal proceedings. He always worked for my best interests with integrity and compassion. I recommend Alex and his team at PBL.

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Jye Hall
Anita Bradley has been an absolute dream to deal with. Anita's conveyancing skills and knowledge knows absolutely no boundaries along with her effective communication skills which has made selling and buying a completely stress free exchange for us. We recommend PBL Law to everyone looking for outstanding service. We will definitely be returning clients.
Kushlan Aluwihare
PBL Law Group were fantastic. Anita from PBL worked with us closely during our property search and made the exchange and settlement process smooth and stress free. Highly recommended.
Gail Whitford
PBL handled my late mothers estate, they were very obliging and patient with any and all questions that we had, thank you to David , Sharon and the other staff that we dealt with, everyone was so easy to talk to and friendly .David came to the home where my Mother was living and helped her to get her will in order, Sharon helped us through the process of executing her wishes when the time came even doing a house call which was so much easier, thank you all so much
S M
I have experienced an excellent service from PBL (especially from Anita) during the sale of my recent property on Central Coast, and during the purchase of our current property in Sydney. Throughout many challengers, especially with the sale, Anita presented her very professional and knowledgeable conveyancer, positively solving all obstacles. "Above and Beyond" Award going to Anita!!! :-)
Amanda Reitzin
The five-star reviews are well-deserved. I needed a motion and a bylaw drawn up for urgent repairs of my strata unit and the AGM was in two weeks' time. My solicitor was friendly, efficient, knew what documents to ask for, and had all the paperwork prepared well within the timeframe. She also took the time to run through all the legalese and the different possible scenarios with me to make sure I understood. I am so glad to have found this firm and I will not hesitate to use their services again in future if the need arises.
Ricky Cooper
Anita is amazing! So attentive, approachable and communicates everything every step of the way. I have now bought and sold property with Anita and I cannot recommend her highly enough.
Ron Thomsen
Our Commercial Property conveyancing was handled very professionally. Anita’s experience and responsiveness was an asset in this transaction.
Trace M
I am so grateful for Anita Bradley from PBL Law Group helped me with this property settlement, she has went above beyond to ensure I understand everything because of our deafness. I will recommended Anita or their team. Thank you so much for all the hard work you have done for us.
Tricia Wheatstone
For almost 18 months I have been a client of Alex Ilkin. Alex is very knowledgeable and professional and has consistently provided me with thorough, honest and well set out advice, including steering my case through appeal proceedings. He always worked for my best interests with integrity and compassion. I recommend Alex and his team at PBL.