Taking over a business can be useful for many reasons. But in the central corporate purchase agreement lurk some hurdles and pitfalls. These are the main obstacles and you should pay attention to that.
It happens again and again that a young company wants to buy another or that several people join forces and want to take over a company rather than a start-up.
This can make sense for many reasons. From my experience, however, I can say that many young entrepreneurs make little or no thought about the content of the required company purchase agreement.
The most important content in a company purchase agreement
So that you can prepare, here are my eight best tips for the most important content in a company purchase agreement.
1st purchase price
It must be clear on what basis the purchase price is calculated. This can be done, for example, on the basis of balance sheets, future profit expectations, the value of fixed assets and intangible assets.
Equally important are the questions to which key date the calculation should be made, who performs the calculation and what happens in the event of a dispute about the result of the calculation.
In addition, it should be regulated how the purchase price is to be adjusted if, at a later date, relevant changes occur within the basis of the calculation of the purchase price. This happens, for example, through subsequent value adjustments or profit changes.
2. Old claims
The purchase contract should regulate who is liable for claims in old liability cases, legal disputes and warranty cases and whether any changes in the purchase price due to these cases are to be considered.
Furthermore, the contract should regulate who bears the liability for arrears on claims of workers. This affects, among other things, unpaid wages.
It should be regulated who bears the payment of outstanding or due taxes and social security contributions and who takes over additional payments from later audits.
It is important to understand that the statutory warranty rules do not suit the business purchase. This is also relevant for the company purchase agreement.
Thus, for example, a subsequent performance is hardly possible and a reversal regularly not only undesirable, but mostly simply not feasible.
For this reason, it should be ensured that unwanted warranty regulations are excluded and that appropriate arrangements are agreed instead. These include, for example, subsequent purchase price adjustments.
The contract should contain provisions in the event that subsequent defects in the company arise. For example, it is possible to regulate what is a defect at all. Often minor deficiencies are excluded up to a certain value limit.
Just as important is the question of how the contractors deal with defects. Are there any compensation in the form of money or adjustment of the purchase price, if this has not been paid in full?
Sometimes the seller comes after the sale of his company but again to the taste and would like to operate again entrepreneurial. He often has contacts in the industry and may possibly make life difficult for the buyer if he becomes active in the industry again.
For this reason, the buyer should ensure that the possible future activities of the seller are limited so that they do not affect the buyer – both in terms of time and in terms of space.
It may be that the parties intend that the seller will assist the buyer for a while – for incorporation, for presentation to customers and suppliers or as an active employee – for example in sales.
It should be clearly stated in the contract on what terms and for what period the seller operates and what competences he holds. In addition, rules should be in place in case the seller does not fulfill his obligations. Especially the last point is often overlooked.
The contract should clearly state when the exact time of delivery is. After all, this often differs from the time the contract is signed.
There is also a need to regulate what happens in the time between contract signing and handover and how to deal with the things that can happen.
For example, what happens if important employees quit or sign major new contracts between the signing of the contract and the transfer of the company? Who informs like coworkers, customers, suppliers, banks and Co. and what are the modalities for the payment of the purchase price?
Conclusion to the company purchase agreement
At first glance, buying a business is a simple matter. Lawyers know that the details are crucial.
In particular, any changes – be it the price, the basis for the calculation of value or the business conditions – are regularly not sufficiently taken into account in the company purchase agreement.
That’s why I always recommend my client to make a list with the questions that come to mind with regard to the purchase. It is also helpful to ask friends, relatives or family members. It’s not about legally thinking through the purchase – there are specialists for that.
Rather, it is about representing the worries that you personally have with regard to the purchase in the company purchase agreement. As I have said many times before: Each contract has to fit the individual case. The above eight points will hopefully give some suggestions for possible worrying concerns.
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