A checklist for sellers
Prepare all figures on the business to satisfy the buyer during his due diligence process. Many deals collapse at this stage because of insufficient information or the Seller not being able to prove his profit. The Purchaser will furnish the broker with a letter confirming his satisfaction with the due diligence.
Comply with any other suspensive conditions of the ‘Memorandum of Agreement ‘or if these conditions are waived it should be reduced to writing. Until the suspensive conditions have been met your contract is null and void.
Organize all purchase invoices for stock prior to stock taking. This is needed to have the cost prices of each stock item available for stock taking.
Ask your broker for advice on how to organize a stock take.
Arrange with purchaser to meet landlord for transfer of lease on premises. Remember that you can also arrange for a cession of your current lease agreement and some landlords may also accept a sub-lease agreement. It is most important to have a copy of your lease agreement available. Be patient in recouping your deposit as some landlords do take their time.
List all assets of the business with a clear description of each.
Make sure that all assets are in working order especially electronic equipment such as fridges. It is important that vehicles are in a good condition to enable the purchaser to obtain a roadworthy certificate. In terms of the Consumer Protection Act defects and problems with equipment should be pointed out to the buyer beforehand.
Arrange for the settlement of Hire Purchase (HP) and lease agreements on assets that have been financed. If your agreement stipulate that the Purchaser will take over these leases and HP’s you would need to assist him in obtaining a new lease or HP and settle the current outstanding balance.
Make sure that you are released from any surety from the bank/financing house.
If your agreement also stipulates that the Purchaser will be paying the purchase price over terms, make sure that you have arranged with the Purchaser the specific method, date and bank details of payment. Remember that your broker will not be involved with these arrangements.
You will know best when to inform your staff of the sale of the business. It is a good idea to do this in conjunction with the buyer. It is important that staff members recognize their rights in terms of the Labor Relations Act and do not feel threatened by the sale of the business. The new owner will carry all the responsibility and liability towards the staff as if there have been no interruption.
Cancel insurance as of effective date or arrange for buyer to take over. If your deal is structured with payment over a term make sure that the purchaser keeps the insurance intact.
Arrange cancellation of electricity for effective date. Do this in conjunction with Purchaser so that he/she is reconnected.
Transfer of telephone line/numbers to Purchaser. You would both need to complete the necessary Telkom paperwork.
Depending on the structure of your deal it is important to finalize your financial statements. It is best that your accountant attend to this for the tax implications are different depending on your decision to either de-register the CC/Pty Ltd, declare a dividend or keep on trading in the same CC/Pty Ltd.
If your deal was for the sale of your shares/membership you would also need to provide the buyer with a set of effective date financial statements.
Provide any assistance to buyer to finalise the transaction. The assistance of the Seller is especially needed during the Buyers application for finance.
Do remember that if your transaction is structured as a going concern that it is important that the buyer is also registered as a VAT vendor from effective date. If not SARS will levy 15% VAT on the transaction which you will have to pay. Make sure your professional broker assists you with completing a well-drawn up sales agreement and following up the process with the buyer.
Most buyers will pay their initial deposit into the Trust Account of the agent. Make sure that you forward instructions to the agent into which bank account you want the money to be paid.
Each business is unique and every other deal is different. Your professional business broker will be able to point out certain criteria that you need to attend to and his experience and advice will be of great value.