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 ALERTS - Nil
  • Item icon Full Commentary - Sale of Business
  • Folder icon Reference materials
    • Item icon AI Prompts
    • Item icon Electronic Signing and Witnessing
    • Item icon Tax rates for individuals – Inland Revneue
    • Item icon Tax rates for businesses – Inland Revenue
    • Item icon Further information
  • Item icon Overview
    Before considering the requirements for the sale of a business, it is important to understand the structure in which the business is held. Different contractual and taxation considerations apply, for example, to the sale of shares in a company owning a business as opposed to the sale by a company ...

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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 Enclosure - 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 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 clauses for deeds and agreements
        • Item icon Amendment clause
        • Item icon Confidentiality clause for defined information - All parties
        • Item icon Confidentiality clause for defined information - One party
        • Item icon Confidentiality clause for terms of agreement - All parties
        • Item icon Confidentiality clause for terms of agreement - One party
        • Item icon Costs clause
        • Item icon Counterparts clause
        • Item icon Dispute resolution clause
        • Item icon Events beyond control clause
        • Item icon Governing law and jurisdiction clause
        • Item icon Interpretation clause
        • Item icon No assignment clause
        • Item icon Notices clause
        • Item icon Severance clause
        • Item icon Waiver clause
        • Item icon Whole agreement clause
      • 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 Nature of the transaction
      The sale of a business typically involves:

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    • Item icon The need for presale planning
      Consideration of the tax payable by a vendor is an essential task to be undertaken before the sale of any business assets. The vendor can consider whether to sell the business or the entity that owns the assets and conducts the business. The importance of structuring the ownership of assets may ...

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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 of financial benefit 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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    • Item icon Goodwill
      Goodwill can consist of either:

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  • Folder icon C. Pre-contract negotiations
    • Item icon Heads of agreement
      The parties, either directly, or with the assistance of a broker, 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 is provided by the vendor to their lawyer with instructions ...

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

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    • Item icon Confidentiality deed
    • Item icon Non-disclosure agreement - Formal
    • Item icon Non-disclosure agreement - Informal
    • 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 a period of exclusivity. During this period, the vendor will not be able to negotiate with anyone else and the purchaser will gain sufficient time to conduct their due diligence enquiries. ...

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    • Item icon Exclusivity deed - Sale of business
    • Item icon Due diligence by the purchaser
      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 about the ownership, finances, and operation of the business. This will allow any risk involved with the business to be appreciated and assessed ...

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  • Folder icon D. Agreement for sale and purchase
    • Item icon Disclosure requirements
      Unlike the sale of real property, there are no statutory disclosure requirements for a sale of a business. However, a vendor will maximise their prospects of selling the business if they provide all relevant information that a purchaser may require.

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    • Item icon Form of agreement
      There is no prescribed form for an agreement for the sale of business. As with conveyancing, the agreement for the sale of business is usually drafted by the vendor’s lawyer. However, unlike conveyancing, there is no requirement that the draft agreement be made available before or during marketing.

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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 Apportionment of sale price and tax
      Most businesses have a goodwill component and a plant and equipment component in their value. When reporting the business sale in the next income tax return, the vendor apportions the price between goodwill and plant and equipment. If the sale is at arm’s length and the agreement apportions the ...

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    • Item icon Motor vehicles
      When the business includes motor vehicles, the agreement for sale and purchase should specify them and provide for their formal transfer via NZ Transport Agency. Motor vehicles, including any registered plant, for example, graders, bobcats, and trucks, are plant and equipment to which the tax ...

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    • Item icon Alcohol licence
      A licence can permit sale and consumption of alcohol on or off premises. Alcohol licences cannot be transferred. They are issued to the business owner and not to the business itself. The purchaser can apply for a temporary authority under the same terms and conditions of the current licence for a ...

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    • Item icon Domains, websites, email, and social media accounts
      The sale and purchase agreement should provide for the transfer of rights to any domains, websites, email addresses, and social media accounts, which are key assets and marketing tools of the business.

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    • Item icon Transfer my domain? – Domain Name Commission NZ
    • Item icon Employees
      If the business has employees, the purchaser may or may not want those employees to continue, and the employees may or may not wish to do so. As an employment relationship is personal between an employer and employee, under general contract law principles, the employment contract cannot be ...

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    • Item icon Business names
      Every business name must be registered unless the proprietor is trading under their own name. Although business names are not strictly intellectual property in the same sense that trade marks are, they can have substantial value. The sale of a business will usually include the transfer of the ...

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    • Item icon Trade marks
      The sale of a business will usually include the assignment of any trade marks from the vendor to the purchaser. Trade mark registration, including whether the vendor or another entity holds the registration, will usually be confirmed before signing the agreement as part of the purchaser’s due ...

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    • Item icon Other agreements and licences
      Agreements The sale of a business will usually need to include assignment of contracts with suppliers and providers.

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    • Item icon Conditions precedent
      The agreement for sale and purchase may provide that various conditions be met before the sale can be completed, for example, the purchaser to be trained by the vendor, assignment of the lease, or obtaining a statutory licence.

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    • Item icon Time for completion
      The agreement for sale and purchase stipulates a completion date, which usually is not of the essence but can be made so by a notice to complete. If time is important, for example, just before the Christmas trade, a special condition making time of the essence can be included. See the Library of ...

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    • 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
      • 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
    • Item icon Share sale agreement
      If the company that owns and conducts the business is being sold, rather than the business itself, this involves the sale of the shares of the company, rather than the sale of the company’s assets. While there may be possible tax and other advantages, most purchasers prefer not to take the risk of ...

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    • Folder icon If required - Share sale agreement
      • 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
    • 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
    • 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 purchaser's lawyer with replies to requisitions
    • Item icon Letter to client with replies to requisitions for approval
    • 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 Updating your NZBN details – New Zealand Business Number
  • Folder icon F. Settlement
    • Item icon Adjustments
      Depending on the type and size of the business, it may be necessary to adjust some of the following:

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    • Item icon Action by the vendor
      The vendor will need to take all necessary steps and supply any required documentation to the purchaser to effect the transfer of:

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    • 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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