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In our ongoing series, "Anatomy of a Deal - The 9-step Guide to Selling Your Business," we've been breaking down the intricate steps involved in selling a business to provide clarity and guidance to business owners embarking on this journey.
In the previous blogs (part 1 and part 2), we've covered crucial aspects such as engaging advisors, drafting heads of terms, conducting due diligence, preparing transaction documents, addressing disclosure, and finalising ancillary documents. Now, as we delve deeper into the intricacies of the deal, we'll explore the pivotal steps that take place during the exchange, completion, and post-completion phases.
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Exchange
At exchange, the SPA and disclosure letter will be signed by you and your buyer (as well as any necessary corporate approvals).
At this stage, you and your buyer will be contractually obliged to proceed with the sale and purchase of shares except in specific circumstances outlined in the SPA. If either of you pulls out of the deal except as permitted, the other can sue for breach of contract.
Typically exchange and completion (see element 8 below) of the sale of a company will happen at the same time, as having a gap creates a lot of additional risk – and therefore work and cost for everyone involved.However, a gap might be necessary if for example regulatory consents or consents from key clients or suppliers are needed.
If this is the case, additional terms such as limits on what you can do with the business between exchange and completion and walk-away rights for both side will need to be negotiated and included in the SPA.If warranties are repeated (and your buyer would usually want this) then there will also need to be a second disclosure letter.
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Completion
Completion is the point where the transaction is done, ownership of the company formally transfers from you to your buyer and most importantly you get paid your completion payment!Completion may take place at a physical meeting, but that is rare these days and more typically the documents are signed electronically (often using Docusign) and then we and your buyer’s solicitors will formally complete on a call.
There is quite a lot of process to get through at completion, and we will lead you through this and check your buyer has also signed everything it needs to.We will also usually agree with your buyer’s solicitors an “undertaking” (a binding promise given by a solicitor and enforced by the Solicitors Regulatory Authority) that they hold the initial consideration and will pay it into our client account following completion.This is what gives you comfort that you will receive your initial payment.
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Post-completion
Completion isn’t quite the end of the story, however. Once we have completed and the money has landed in our client account, we will send the consideration to you. You will also need to deliver key items, such as things like statutory registers and bank cards/card readers, to your buyer. On the buyer’s side they will need to pay the applicable stamp duty, deal with Companies House filings and update the statutory registers. You and the buyer may also want to agree an approach to telling employees and key clients and suppliers about the transaction, to ensure a smooth handover.
As you can see, there is a lot to selling your company and having the right solicitors or other advisors is crucial in making the process as efficient and smooth as possible.
At Kingsley Napley, we understand the complexities of selling a business, and we're here to provide comprehensive support every step of the way. Whether you're navigating the exchange, completion, or post-completion phase, our team of experienced professionals is dedicated to guiding you through the process with expertise and efficiency.
If you are considering selling your company, we’d be delighted to help you through the process. Please contact John Young or Krystina Tang.
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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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