selling your business
DESCRIPTION
Are you thinking of selling your business? There are many considerations to take on board when you are Selling your business here at Gannons Solicitors we are experts in guiding you through the process to ensure you have the best possible outcome. In this brief presentation we will cover off; Preparation for sale Sales of shares or Assets Heads of agreement Deferred consideration Indemnities & warranties TaxTRANSCRIPT
Selling YouR Business
CATHERINE GANNON
HELEN CURTIS
What we are covering
• Preparation for Sale
• Sale of Shares or Sale of Assets
• Heads of Agreement
• Deferred Consideration
• Indemnities and Warranties
• Tax
Preparation for Sale
• Make sure you have formal agreements in place
with your suppliers and customers
• Employees and directors
• Run your own due diligence
• Power to sell – articles and shareholders’
agreements
• Consents and assignments
• We can send a checklist of issues to think about
Financial due diligence
• Is the business solvent
• What debts will need to be repaid by the
buyer
• Dividends pre-sale
• Cash in the bank and working capital
• Completion accounts
Valuation
• How much is the business worth
• Obtaining details on past sales difficult
• Price earnings multiples
• Recurring fee income
• What is really being sold
• Dealing with brokers – fees and commissions
Sale of Shares or Sale of Assets
• Share Sale
• Asset Sale
Heads of Agreement
• Not legally binding
• Exclusivity period
• Important discussion areas you might not
consider:
- anti-embarrassment clause
- restrictive covenants
- timing of consideration
Terms of Sale
• When will you be paid
• How much will you be paid – cash or shares or
both
• Restrictive covenants
• Ongoing responsibilities
• Claw backs
Deferred Consideration
• Earn outs
• Delayed payments
Warranties
• Principle of Caveat Emptor
• Contractual statements
Indemnities
• Cap
• Disclosure Letter
Conditions Precedent
• Buyer’s due diligence
• Different for Asset Sale or Share Sale
• Non-Assignment provisions in contracts
Intellectual Property
• Due Diligence
• Evaluation
• Purchase agreement warranties
• Transfer
How much will you be left with
Entrepreneur’s Relief
• Overview of the relief
• Material disposals
– Disposal of shares
– Whole or part of business
– Disposal of one or more assets
• Share options
What is Entrepreneurs’ Relief
• Applies to gains made on disposal of all or part
of a business
• Includes assets following cessation
• Applies to first £10m of gains
• Charged at 10%
• Lifetime limit of £10m
• No minimum age limit
What does it mean in terms of tax
• Business sold for £876,000
• Less: cost of shares (£1,000)
• Capital gain £875,000
• Less: annual exemption £10,900
• Taxable gain £864,100
• ER CGT @ 10% £86,410
• Walk away with £789,590
Qualifying Business Disposals
• Shares or securities in a trading company
• The whole or part of a business
• Certain assets used in a business which has
ceased
• Certain personal assets used in a business.
Shares in a trading company
• Conditions to be met for one year period
ending on date of disposal
• Relief available if company has ceased
trading
• Provided held at least 5% for one year on
date of disposal, acquisitions over the 5%
will qualify even if held for less than a year
• Employee or officer – no minimum hours
Whole or part of a business
• Owned for one year period ending with date
of disposal
• Disposal of all or part of the business as a
going concern
• Any trade, profession or vocation
• Assets not used for the business will not
qualify
• Case law on what constitutes disposal of
part of a business
Assets used on cessation of business
• Conditions to be met:
• Owned by individual throughout 1 year
ending on date which business ceases
• Business ceased to be carried on in the
period of 3 years ending on date of
disposal
• Assets not used for the purposes of the
business excluded
Personal assets used in business
• Disposal by partner or shareholder of
personally-owned asset
• Conditions to be met
- disposal (which qualifies for ER)
- withdrawing from business
- throughout 1 year prior to disposal
- not used for unconnected purposes
Winding up the company and ER
• Procedure for winding up
• Capital payment or dividend payment
• Conditions for ER
Taxation of earn outs
• Pay tax upfront or later
• Valuation with HMRC
• Payment dates – manage cash flow
ANY QUESTIONS
How can we help you?
Visit www.gannons.co.uk for further information
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