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Special Conditions Sale of Business

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Special Conditions Sale of Business

Special Conditions Contract for Sale of Business in New South Wales is done with the Contract for Business created by The Law Society of New South Wales.

For each edition, practitioners have been formulating their own Special Conditions. For whatever reason, each edition of standard terms produced by the Law Society of New South Wales spawns its own unofficial  special conditions which filter through the profession, attached to clients’ contracts.

 

The Special Conditions Contract for Sale of Business alter Standard Terms of the Contract for the sale and purchase of business by:

  • Deleting and amending the Standard Terms
  • Including new terms which are not included in the Standard Terms

This has the effect of removing some unwanted results from using the Standard Terms in their unamended form.

Sale of Business NSW

The Special Conditions to the Contract for the sale of Business are designed to be added to the Contract for the Sale of Business . They are normally inserted after the Standard Terms

Note Special Conditions are not intended to be used on their own. You still need to purchase the Contract for the sale of Business from the Law Society of New South Wales. There is an online shop on the website of the Law Society of New South Wales from which you can purchase a one-use-only copy of the Contract for the sale and purchase of Business. Select the appropriate set of special conditions, add your annexures and you have your Contract!

Special Conditions Sale of Business

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Selling Your Business – Some helpful hints

Maximise the selling price of your business before you list it for sale. Listing your business for sale without checking the things purchasers will look for first will cause you problems. The sale will fall over or you will have to accept a lower price. Maximise your sale price and safeguard your sale from falling over by properly preparing your business before you sell it.

Here is one example: Mr A wanted to buy a business. The name on the contract was not registered. This meant that the business name could not be transferred because the seller of the business did not own it.  Was the business registered as a trademark ? No.  Worse, there was an existing registered trademark (not the seller) almost identical to the name of the business being sold. This effectively meant that Mr A could not register the business name as a trademark after purchasing the business, because of an pre-existing almost identical trademark belonging to some one else. The lease also had less than a year to run with no option to renew.

What should the owner have done? Getting their trademark registered would have been a good idea. If not possible with the existing name, re-branding and registereing a business name an trademark. Approaching the landlord for a new term on the lease, preferably with an option. Make the best possible deal you can and then sell ito to the purchaser.

A purchaser does not want to buy a business and then have to worry about registering a new business name and trademark and negotiate a new lease. These are things that the seller is better placed to do. They have known the landlord for longer and presumably have a bit of good will up their sleeve.

When someone buys the business, they expect to have ownership of the name and a decent amount of time left to run on the lease.

CHECKLIST

Contract for the Sale of Business edition (Law Society & REINSW)

The standard terms require things to be done between exchange and settlement.  The following is a list of those things, in the order in which they appear in the contract. The number of the clause is shown in brackets.

  1. Deposit paid in full (2)
  2. Trading stock (clause 4)
  3. Exercise option in lease (if required) (9.1.4)
  4. Release PPSR charges (10)
  5. Purchaser to provide proof of registration for GST on settlement (13.4.2)
  6. Vendor to give purchaser tax invoice for any taxable supple (13.8)
  7. Vendor to serve Landlords consent 7 days prior to settlement (19.2)
  8. On completion vendor to provide (20):
    1. Business name registrations
    2. Documents evidencing tenure (Lease) – vendor to provide original Lease
    3. Other documents required to register business (licenses etc.)
    4. Documents of title
    5. Vendor to transfer to purchaser:
      1. Contact numbers
      2. Make other services to the business available to the purchaser:
        1. Website
        2. Email accounts
      3. Serve mortgagee consent and / or head lessor (if applicable)
      4. Balance of purchase price
      5. Order on the deposit holder to release deposit
    6. Vendor to calculate book debts on completion (21)
    7. Vendor to train purchaser (26)
    8. Purchaser to supply references and other information required by landlord (27.2)
    9. Vendor to apply to landlord for consent to transfer lease (27.3)
    10. Landlord to grant new lease to purchaser by completion date (28.3)
    11. Purchaser to serve form of transfer 7 days prior to completion (29.3)
    12. Vendor to serve Landlord’s consent prior to completion (29.5)

Franchise

  1. Vendor to apply to franchisor for consent (30)
  2. Purchaser to supply references to franchisor

Employees

  1. Vendor to give employees 14 days’ notice of termination.
  2. Purchaser to notify vendor of continuing employees 15 days before completion (32.1)
  3. Purchaser to offer employment to continuing employees (32.2)
  4. Vendor to payout employee entitlements (33) and
  5. Vendor to provide confirmation of employee entitlements on settlement (34)
  6. Purchaser to elect whether service with vendor is recognised (34.2)
  7. Purchaser / Vendor to adjust for employees on settlement (34.3)
  8. Vendor to release PPSR charges (35)

 

Consider also how the Special Conditions in your contract alter or affect the standard terms and conditions. List items required by Special Conditions below:

 

 

 

 

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