BUYING AN AGENCY
Advice Review advice on, and prepare documentation for:
• Capital Gains Tax and VAT payment • TUPE regulations
• Contracts of employment for staff transferring to new employer
• Employees’ pension fund (398)
Buying A compAny Acquisitors are normally reluctant to purchase a company by buying the shares held by vendors. If this route is inevitable, special precautions are necessary. Problems can be avoided to a limited
extent by ‘emptying’ the company to be acquired of all assets and liabilities that are not essential to the transfer of ownership. Examples will include: Purchase by vendors of personal use items, eg cars, computers, office furniture and fittings at a fair value Payment of creditors and collection of all monies due to the company Payment and cancellation of credit cards and any credit arrangements with sundry suppliers eg hotels, restaurants and clubs.
Hiving down Acquiring a ‘clean’ company, goodwill, business name and trademarks will enable the purchaser to transfer the remaining essential assets and liabilities to the acquirer and for the empty shell to be wound up after any corporation and other taxes have been agreed and paid. It is common for part of the purchase
price to be held in escrow in an account in the names of solicitors acting for both parties until all tax and liabilities are agreed and paid. Warranties that taxes due have been
paid, given by vendors, will be more extensive if shares are purchased than when a direct asset and goodwill sale is concerned. These may well extend to the personal tax affairs of exiting shareholders and their payment methods to staff, contractors and suppliers if rewards and benefits were paid other than at arm’s length and tax deducted at source when appropriate.
convenient dAtes Completions set for the last day of the month avoid the hassle of calculating receipts and payments due in terms of working days rather than calendar months. Critical in deciding the balance of client
account monies to be transferred to the care of the purchaser is the process of agreeing the aggregate of individual customer balances and of deposits yet to be paid to approved bodies. A convenient, almost essential, method
is to agree that the correct monies are held in the vendor’s client account a few working days prior to completion and that a fully documented bank reconciliation of client monies has been agreed and signed off by principals.
Completions set for the last
Pay creditors and collect all monies due. 40 JUNE 2010 PROPERTYdrum
day of the month avoid the hassle of calculating receipts and payments in terms of working days rather than calendar months.”
If this practice is followed, then only the
last few days’ transactions need to be reviewed and the final client account to be transferred agreed, and a transfer organised for the critical time and date. Tenants are slow, reluctant and dilatory
if asked to complete new standing orders for payments of rent. Banks and most building societies will, if given sufficient notice, arrange bulk transfers so that rents paid into the vendor’s client account are automatically and immediately transferred to a nominated
client account of the vendor. Allow several days to agree the process with
both banks; many local offices are unfamiliar with the process at
local level and the intervention of regional offices is almost always necessary, with any commitment to co-operate agreed well in advance.
tHe criticAl Hours There is a tradition that major deals are accompanied by working to the most unsocial hours by legal advisors on either side, often with principals present in the meeting rooms of solicitors and advisers. Document production, one draft after another, an immaculate refreshment service, and an atmosphere of pressure build during the night. This tradition is unnecessary and
perhaps only part of the mystique associated with major transactions. There are few transactions in the agency sector that could justify such drama. A quiet review and collection of all documents to be signed will be all that is necessary for most agency deals.
on tHe dAy There is no real need for the parties to be present in the same room, signing one paper after another, often now unread, as they pass around the table. Completions by parties often distant from one another can be conventionally arranged by telephone and e-mail. However, a completion ceremony with principals and solicitors present should be an agreeable occasion; provided that the champagne is kept cold and the glasses chilled until… completion has taken place. Congratulations all round!
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