Keeping Secrets Secret

Thinking about selling your business? Perhaps you have entered into informal discussions with a possible buyer. The buyer is looking for some more detailed information about your business in order to decide whether he wants to make you an Offer. Maybe he wants some past financial records or other confidential information in order to determine price. How do you give him this information, before the deal is even made? Using a Nondisclosure & Confidentiality Agreement can be helpful. It will outline the terms upon which you agree to provide certain confidential information, and it will set out how it can be used, to whom it can be disclosed and when it has to be returned. This can be a separate stand-alone agreement, or similar wording can be incorporated into a letter of intent, where the parties at least agree that it is their intention to buy and sell and they will be entering into negotiations in this regard. The agreement, no matter the form, will help to clarify the rights and obligations of the parties, and may assist with narrowing down some of the issues to be resolved before a definitive Agreement of Purchase and Sale can be drawn up. Being careful with your business secrets just makes good business sense.

Reps & Warranties on a Share Sale

Today I spent some time working my way through a share purchase agreement, largely amending it to narrow the representations and warranties that my client was being asked to give, on the sale of his shares to another shareholder of the same company. The buyer actually has a great deal of knowledge about the company, and is involved in its day-to-day operations. In this context, it is very important to examine what each of the parties has knowledge of, how much risk the purchaser will bear and how many assurances the vendor will give. This is often a major area of negotiation between the parties, as there is usually a time period, after the sale, during which a purchaser can sue a vendor for any representation or warranty that was false. If you are buying or selling shares in a company, this is an important area to review and on which to obtain legal advice. It just makes good business sense.

Do You Have a Built In Buyer for Your Business?

I have coincidentally fielded three phone calls from clients in the past week, discussing the possibilities around selling their business to an existing employee. This can be a really good idea, provided the employee is prepared to pay fair market value for the business, and you are prepared to, perhaps, take payment over time. Often, a structured buy in can be negotiated, where the employee purchases a percentage of your shares of your business each year, slowly taking over the business. Of course, there are many issues to be considered. Even minority shareholders have rights, so you will want to be sure you have a shareholders agreement in place which sets out the rights and obligations of the shareholders, and clarifies roles. You will also have to consider how you might get the shares back if the employee, for instance, buys 10 percent of your business and then leaves or is terminated. But the employee likely knows your business and may make the perfect buyer if you can negotiate mutually agreeable terms. It's worth a look inward to see if the buyer of your business may actually be sitting in the office next door. Thinking ahead and planning your exit strategy makes good business sense.