law 51
Exit strategies: protecting yourself when selling
Business owners considering exiting their business in the future should protect themselves and avoid falling into some of the most common traps, says Jeremy Over, senior solicitor at Moore Blatch
The private sector and small businesses are the driving force behind the UK economy. While your main focus may currently be on growing your business, it is always wise to give some thought to the future. When it comes to planning a sale of the business, then there are issues to be aware of.
By taking action early, knowing your potential liabilities and making sure you have the right contracts and structures in place, you will be better protected from any prospective problems.
Where there are several sellers involved in a transaction involving the acquisition of shares, the issue of contracting can become a thorny one.
As the seller you will usually need to provide contractual protection for any buyer in the form of warranties and indemnities.
If these obligations are breached, the buyer may have a right to instigate a legal claim against you to seek recompense and this will affect you in different ways, depending on the way in which the contract is drafted.
A buyer may ask for warranties and indemnities to be given on a joint and several basis. This means that if one or more of the sellers has for example disappeared or since gone bankrupt, then the buyer will be able to claim the difference from the remaining sellers. This may even mean that a seller could
on several liability only, which would mean the buyer would be left having to pursue each seller for an amount proportionate to their respective shareholdings.
Much depends on your bargaining position. As the seller, if you have to accept joint and several liability then you may consider entering into a contribution agreement with the other sellers. This agreement may apportion liability among the sellers, so if one receives a claim from the buyer, then they can be reimbursed from the others in proportion to their respective shareholdings.
Another option is taking out an insurance policy to cover liability for claims. However, such policies are usually expensive and perhaps not a viable option in practice.
Above all, make sure you get the right advice to ensure you are protected and know your options.
receive a claim higher than the amount he received through the share purchase in the first place.
For these reasons, it would usually be the sellers’ preference to insist
Details: Jeremy Over 023-8071-8025
jeremy.over@mooreblatch.com www.mooreblatch.com
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THE BUSINESS MAGAZINE – THAMES VALLEY – MAY 2013
www.businessmag.co.uk
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