Sale and Purchase of Business | By Lawyers
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Sale and Purchase of Business

This publication guides practitioners through the sale or purchase of a business.

2 Matter Plans

Overview

The commentaries cover tax implications, the status of the premises, and the importance and details of due diligence and disclosure.

The Reference materials folder includes comparison tables for different business structures and guidance on electronic signing and remote witnessing. The Getting the matter underway folder contains essential compliance and client engagement documents. The comprehensive Retainer Instructions ensure that all necessary information is gathered from the client at the outset of the matter.

The precedent agreement provides for the transfer of all business assets, including copyright works, trademarks, supplier contracts, and customised restraint of trade provisions, ensuring they are enforceable. It also addresses the management of confidential information and e-commerce, binds key individuals, and includes clauses covering non-solicitation of staff and customers.

Precedents in this publication include:

  • Uniform agreement for sale and purchase of business;
  • Library of annexures and special conditions for business;
  • Non-disclosure agreement;
  • Due diligence questionnaires;
  • Library of other contracts, licences, and agreements.
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2 Matter Plans Included

  • Item icon How to complete AML details on cards and matters
  • Item icon ALERTS - Nil
  • Item icon Full Commentary - Sale of Business
  • Folder icon Reference materials
    • Item icon AI Prompts
    • Item icon Looking to the Future
    • Item icon Electronic Signing and Witnessing
    • Item icon Tax rates for individuals – Inland Revenue
    • Item icon Tax rates for businesses – Inland Revenue
    • Item icon Further information
  • Item icon Overview
    Clients sell various businesses for various reasons. Therefore, some insight is necessary to ensure that all important matters are dealt with. The Retainer Instructions – Sale of Business on the matter plan prompt for all relevant issues. There are 2 ways to sell a business. Either the ...

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  • Item icon Summary of the process
    The usual steps when acting for the vendor include:

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  • Folder icon A. Getting the matter underway
    • Item icon File cover sheet - Sale of business
    • Item icon To do list - Sale of business
    • Item icon First steps
    • Item icon Client details and verifying identity
    • Item icon Retainer instructions - Sale of business
    • Item icon Conflict of interest check
    • Folder icon If required - Land transactions - Authority and instruction
      • Item icon Electronic land transactions
      • Item icon Authority and Identity Requirements for E-Dealing Standard 2018 – LINZS20018 – Land Information New Zealand
      • Item icon Certification of Electronic Instruments (Statutory Requirements and Retention of Evidence) Standard 2018 – LINZS20012 – Land Information New Zealand
      • Item icon Authority and instruction (A&I) from private individual client for an electronic transaction
      • Item icon Authority and instruction (A&I) from private corporate client for an electronic transaction
    • Item icon Initial letter to client with Client Care and Terms of Engagement and enclosures
    • Item icon Client Care and Terms of Engagement
    • Item icon Scope of work - Sale of business
    • Item icon Summary of relevant considerations
    • Item icon Authority to contact accountant
    • Folder icon If required - Conveyancing Client Care and Terms of Engagement
      • Item icon Conveyancer Client Care and Terms of Engagement
      • Item icon Scope of work - Sale of real property
    • Item icon Initial letter to agent
    • Folder icon If required - Acting for both parties
      • Item icon Letter to client acknowledging we act for both parties
    • Item icon Time and costs estimates
    • Folder icon If required - Updating costs disclosure
      • Item icon Letter to client updating costs estimate
    • Folder icon General deeds, agreements, execution clauses and statutory declaration
      • Item icon Deeds and Agreements
      • Folder icon Deeds
        • Item icon Deed for general use
        • Item icon Deed of guarantee
        • Item icon Deed of release
        • Item icon Confidentiality deed
        • Item icon General deed of indemnity
        • Item icon Deed of assignment of agreement
        • Item icon Deed of gift
        • Folder icon Library of standard clauses for deeds
          • Item icon Amendment
          • Item icon Confidentiality for defined information - All parties
          • Item icon Confidentiality for defined information - One party
          • Item icon Confidentiality for terms of agreement - All parties
          • Item icon Confidentiality for terms of agreement - One party
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Agreements
        • Item icon Agreement for general use
        • Item icon Heads of agreement
        • Item icon Non-disclosure agreement - Formal
        • Item icon Non-disclosure agreement - Informal
        • Folder icon Library of standard clauses for agreements
          • Item icon Amendment
          • Item icon Confidentiality for defined information - All parties
          • Item icon Confidentiality for defined information - One party
          • Item icon Confidentiality for terms of agreement - All parties
          • Item icon Confidentiality for terms of agreement - One party
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Execution clauses
        • Item icon Execution clauses - Agreements
        • Item icon Execution clauses - Deeds
      • Folder icon Statutory declaration
        • Item icon Statutory declaration
        • Item icon Standard annexure note for documents
  • Folder icon B. Initial considerations
    • Item icon Identifying the parties to the transaction
      It is important at the outset to be clear on who the client is, who the vendor and purchaser are, and to establish the basis and extent of their authorities to conduct the proposed transaction. Businesses can be owned by different entities, including sole traders, companies, trusts, or ...

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    • Item icon Business Structures and the Comparative Table
    • Item icon The nature of the transaction
      The sale of a business typically involves:

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    • Item icon Tax considerations
      The distinction between income and capital Structuring the sale of a business in the most tax advantageous manner is financially beneficial to the client. The purchaser will also want to structure the acquisition so that ongoing tax minimisation is achieved, and the minimum tax liability arises if ...

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  • Folder icon C. Pre-contract
    • Item icon Heads of agreement
      The parties, either directly or with the assistance of a broker or agent, will often negotiate and record the essential points of their agreement before involving any lawyers. These will be recorded in a document called a heads of agreement, which the vendor provides to their lawyer with ...

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    • Item icon Heads of agreement
    • Item icon Confidentiality
      There are various ways to facilitate the disclosure of confidential information between the parties:

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    • Folder icon Confidentiality agreements, deed, and clauses
      • Item icon Confidentiality deed
      • Item icon Non-disclosure agreement - Formal
      • Item icon Non-disclosure agreement - Informal
      • Item icon Confidentiality for defined information - All parties
      • Item icon Confidentiality for defined information - One party
      • Item icon Confidentiality for terms of agreement - All parties
      • Item icon Confidentiality for terms of agreement - One party
    • Folder icon If required - Option to purchase
      • Item icon Option to purchase agreement
    • Item icon Exclusivity
      Prospective purchasers may seek, particularly in a strong market or with an attractive business, to negotiate an exclusivity period during which the vendor will not be able to negotiate with anyone else, and the purchaser will gain sufficient time to conduct their due diligence enquiries. An ...

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    • Item icon Exclusivity deed - Sale of business
    • Item icon Purchaser's due diligence
      A purchaser will generally want to know as much as possible about the business before committing to buy it. This means making all possible enquiries into the ownership, finances, and operations of the business to identify and assess business risks against the proposed purchase price.

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    • Item icon Due diligence questionnaire - Purchase of business by acquiring business assets
    • Item icon Due diligence questionnaire - Purchase of business by acquiring company
    • Item icon Requisitions
      Requisitions on title, or simply requisitions, are written questions or objections raised by the purchaser's lawyer after reviewing the sale and purchase agreement, the due diligence material, and the vendor's disclosures. Their purpose is to enable the purchaser to verify that the vendor can ...

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    • Item icon Letter to purchaser's lawyer with replies to requisitions
    • Item icon Letter to client with replies to requisitions for approval
    • Item icon Apportionment of sale price and tax
      The purchase price for most businesses is made up of 3 components:

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  • Folder icon D. Contract
    • Item icon Form of agreement
      There is no prescribed form for an agreement for the sale and purchase of a business. As with conveyancing, the agreement for the sale and purchase of a business is usually drafted by the vendor’s lawyer. However, unlike conveyancing, there is no requirement that the draft agreement be available ...

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    • Item icon The By Lawyers Uniform Agreement for Sale and Purchase of Business
      The By Lawyers Uniform Agreement for Sale and Purchase of Business:

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    • Item icon Uniform agreement for sale and purchase of business - Part 1 of 2 - Particulars of sale - By Lawyers
    • Item icon Uniform agreement for sale and purchase of business - Part 2 of 2 - Terms and conditions - By Lawyers
    • Item icon Agreement for sale of shares
      If the company that owns and conducts the business is being sold rather than the business itself, the sale involves the transfer of the company’s shares, not its assets. While there may be tax and other advantages to a company sale, most purchasers prefer not to take the risk of inheriting any ...

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    • Folder icon If required - Agreement for sale of shares
      • Item icon Agreement for sale of shares - Concise
      • Item icon Agreement for sale of shares - Extensive - Company takeover
      • Item icon Option to purchase shares agreement
    • Item icon Contract provisions
      Parties See Identifying the parties to the transaction, above.

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    • Item icon Special conditions
      Additional conditions tailored to the parties' specific agreements relevant to the transaction can be added to the contract to deal with such issues as:

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    • Item icon Prompt comparing instructions with draft agreement for sale and purchase of business
    • Item icon Prompt for letter to client with summary of agreement for sale and purchase of business
    • Folder icon Library of agreement annexures
      • Item icon Annexure page
      • Item icon Annexure detailing ongoing agreements
      • Item icon Annexure of plant fixtures and fittings
      • Item icon Annexure of registered vehicles
      • Item icon Annexure with employee details
    • Folder icon Library of further terms
      • Item icon Arbitration
      • Item icon Completion - Time is of the essence
      • Item icon Computer software and domain names
      • Item icon Confidentiality
      • Item icon Domain names, websites, and email addresses
      • Item icon Deposit - Less than 10 per cent
      • Item icon GST payable by purchaser in addition to price
      • Item icon Guarantee - Corporate purchaser
      • Item icon Interdependent agreements - Same parties
      • Item icon Interdependent agreements - Different parties
      • Item icon Interest to run from expiry of notice to complete
      • Item icon Late completion - Payment of interest
      • Item icon PPSA - Release of security interest
      • Item icon PPSA - Undertaking by secured party to register release of security interest
      • Item icon Purchase price allocation - Agreed values
      • Item icon Purchase price allocation - Valuation required
      • Item icon Outstanding notice - Purchaser will comply
      • Item icon Registered vehicles
      • Item icon Restraint of trade variation of standard clause
      • Item icon Restraint of trade variation of standard clause - Existing clientele
      • Item icon Sale of rent roll business
      • Item icon Software
      • Item icon Transfer of business name
      • Item icon Trial period
      • Item icon Vendor to comply with outstanding notice
    • Folder icon Library of other agreements, licences and contracts
      • Item icon Agreement for sale of a rent roll
      • Item icon Contract for sale of personal property
      • Item icon Deed of assignment of lease
      • Item icon Deed of assignment of agreement
      • Item icon Deed of restraint of trade
      • Item icon Distribution agreement
      • Item icon Intellectual property licence
      • Item icon Licence of business name
      • Item icon Licence of copyright
      • Item icon Medical centre licence agreement
      • Item icon Option nomination notice
      • Item icon Short licence agreement of business and premises
    • Item icon Letter to purchaser's lawyer submitting agreement
    • Item icon Letter to client requesting appointment to sign agreement
    • Item icon Letter to client with agreement for signing
    • Item icon Letter to purchaser's lawyer confirming agreement
    • Item icon Letter to purchaser's lawyer enclosing signed and dated agreement
    • Item icon Letter to client after agreement entered
    • Item icon Letter to agent confirming agreement entered
  • Folder icon E. Mid transaction
    • Item icon Lease
      See the By Lawyers Leases publication. If continuing in the same premises, the purchaser either accepts the transfer of the existing lease or enters into a new lease with the landlord.

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    • Folder icon Common forms
      • Folder icon Land Information New Zealand - General land transactions
        • Item icon Lease instrument
        • Item icon Lease variation instrument
        • Item icon Lease surrender instrument
        • Item icon Licence surrender instrument
        • Item icon Transfer instrument
        • Item icon Mortgage instrument (all obligations)
        • Item icon Mortgage instrument (fixed sum)
      • Folder icon Land Information New Zealand - Foreign investment
        • Item icon Application form – Sensitive Land: Benefit to New Zealand – land only
        • Item icon Application form – Sensitive Land and SBA: Benefit to New Zealand, including a significant business asset
        • Item icon Application form – Significant Business Assets
        • Item icon Standalone investor approval
        • Item icon Discretionary Exemption
    • Folder icon If required - Lessor
      • Item icon Letter to lessor's lawyer seeking deed of assignment of lease
    • Item icon Letter to discharging mortgagee for discharge
    • Folder icon If required - Deposit at settlement
      • Item icon Letter to agent when deposit required at settlement
    • Item icon Licences
      Many types of businesses require licences to operate. Sometimes the licence is transferable from the vendor to the purchaser; other times, the purchaser must apply for their own licence. In either case, a special condition can address the details of transferring or obtaining the licence, what each ...

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    • Item icon Digital assets
      The contract should provide for the transfer of rights to any domains, websites, email addresses, and social media accounts that are key assets and marketing tools of the business. However, if shares are being sold, leaving the identity of the company account holder unchanged, no transfer is ...

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    • Item icon Employees
      See the By Lawyers Employment Law guide for more information and precedent employment agreements. Under general contract law principles, the employment relationship between an employer and employee is personal. That means an employment contract cannot be unilaterally transferred from one employer ...

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    • Item icon Business names
      Although business names are not strictly intellectual property in the same sense that trade marks are, they can have substantial value. For some purchasers, the business name will be unimportant. Some vendors may seek to retain the name. Even where a purchaser has no interest in having the business ...

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    • Item icon Updating your NZBN details – New Zealand Business Number
    • Item icon Intellectual property
      Intellectual property is at the heart of many businesses. Assigning intellectual property rights can be crucial to a business's value and successful sale. Intellectual property describes a broad range of assets developed through the application of human intelligence that may need to be assigned if ...

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    • Item icon Search for existing trade marks – New Zealand
    • Item icon Deed of assignment of intellectual property
  • Folder icon F. Settlement
    • Item icon Requirements
      Clause 12 of the By Lawyers contract lists everything the vendor must provide on settlement. There may be additional requirements under any special conditions. The vendor will need to supply any documentation the purchaser will require to:

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    • Item icon Apportionments
      Apportionments are made at settlement so that periodic outgoings and income are borne by the vendor and purchaser in proportion to their respective periods of ownership, or as otherwise agreed between them. Depending on the type and size of the business, it may be necessary to apportion some of the ...

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    • Item icon Searches
      As with a conveyancing transaction, the purchaser is likely to conduct the following searches immediately before settlement to protect their position from any dealings that may have occurred between exchange and settlement:

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    • Item icon Searching the Companies Register – New Zealand Companies Office
    • Item icon Search Insolvency register – New Zealand Insolvency and Trustee Service
    • Item icon Settlement Statement
    • Item icon Letter to client with settlement statement and invoice
    • Item icon Direction to pay to purchaser's lawyer
    • Item icon Letter to agent confirming settlement
    • Folder icon If required - Notices
      • Item icon Notice to complete
      • Item icon Notice of termination
      • Item icon Notice of avoidance
      • Item icon Letter to other side serving notice
      • Item icon Letter to other side's lawyer serving notice
      • Item icon Letter to other side's lawyer disputing notice to complete
  • Folder icon G. Finalising the matter
    • Item icon Letter to client after settlement finalising the matter
    • Item icon Example invoice
    • Item icon Invoice recital - Sale of business
    • Item icon Closing the file
    • Item icon File closing checklist
  • Item icon Comments and suggestions for By Lawyers

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