8. Business Sales

Question 1

what is the position in England and Wales on an asset acquisition

Answer 1

each of assets and liabilities are specifically identified and individually transferred in the manner required

Question 2

what does US asset acquisition require

Answer 2

compliance with applicable bulk sales statutes

seller must complete a list of exsisting creditors which is registered with gov department

require that each creditor is given notice period before transfer of business

Question 3

when does a business qualify as going concern in french law

Answer 3

where it includes good will

Question 4

what happens where a business qualifies as a going concern in french law

Answer 4

subject to statutory provisions (goodwill, intangible assets, equipment, leasehold)

acquisition may only be realsied by means of a specific deed subject to publication and other formalities .

Question 5

what happens if a french deed of sale is inaccurate as to compulsory issues

Answer 5

buyer can ask for reduction in PP or cancellation of sale

Question 6

what will SPA specify re timing of completion

Answer 6

that transfer of all required assets take place at completion

Question 7

what if formal transfer of an asset is not possible at completion

Answer 7

seller holds asset on trust for benefit of buyer

buyer is able to use asset to run business

Question 8

how can cross border spas resolve issue of non recognition of the trust

Answer 8

inserting condition precedent clause into agreement

Question 9

where are freehold / leasehold premises listed in spa

Answer 9

in a schedule

Question 10

when does buyer assume risk of leasehold / freehold

Answer 10

from exchange of the agreement & ought to take insurance out from this date / have interest noted on LL policy

Question 11

why should seller request consent from LL for assignment asap

Answer 11

to ensure licence is available in good time for exchange - buyer should give LL list of referees to pass onto LL immediately

Question 12

s19 LTA 1927

Answer 12

where lease contains covenant not to assign without LL consent, LL cannot unreasonably withhold its consent. LL under a duty to give decision within reasonable time and give reasons for refusal

Question 13

what if licence to assign is not ready by the time parties are in a position to sign spa

Answer 13

may make agreement condition on LL consent and incorporate right for parties to rescind

Question 14

what warranties may buyer seek re property

Answer 14

state of premises to be acquired, any relevant environmental matters

Question 15

what may other civil law jurisdictions require

Answer 15

notarial deed executed by civil law notary in that jurisdiction

Question 16

consideration re plant and machinery

Answer 16

schedule to be attached to spa

Question 17

how can a buyer seeking to purchase all assets safeguard iteself

Answer 17

provide that plant and machinery ‘used in business’ are to be transferred , including that which is included in the schedule

Question 18

warranties buyer will seek as to state of plant and machinery

Answer 18

that they are in proper state of repair and condition, and in satisfactory working order

they are not dangerous, obsolete, or in need of replacement,

they have been properly/regularly maintained

theya re adequate for the needs of the business

Question 19

general consideration for IP (trademarks, service marks, reg designs, copyrights, patents)

Answer 19

to be listed in a schedule to spa

Question 20

what might buyer seek in warranties re IP

Answer 20

seller is beneficial owner/reg proprietor of IP rights

that to best of sellers knowledge and belief, those rights are valid and enforceable

that seller has not granted any person a right to do anything which would otherwise be an infringement of those rights

that no licences have been granted to the seller or are required to run the business
operation does not infringe IP rights of any other person

Question 21

what cannot be included in spa without consent of true owner

Answer 21

equipment employed by seller subject to hire=purchase, contract hire or leasing arrangements

Question 22

what is stock?

Answer 22

raw materials, work in progress, finished goods

Question 23

how can spa provide re valuation of stock

Answer 23

to be valued at or shortly after completion- the price to be left outstanding until they have agreed the valuation

Question 24

what should the agreement provide for re stock

Answer 24

who is to carry out valuation, basis on which stock is to be valued, procedure if parties dispute valuation

provision usually made for dispute to be referred to independent expert (buyer may be obligated to pay half of valuaton costs)

Question 25

what should seller ensure re transfer of contract

Answer 25

buyer receives benefit of all contract to enable them to continue trading

Question 26

how can benefit be assigned

Answer 26

s136 LPA 1925 via notice to other contracting party

Question 27

how can existing contract be novated

Answer 27

other party to contract agrees to release seller, allowing buyer to take over benefit and burden

Question 28

what if consents are delayed in routine contracts

Answer 28

seller remains liable on existing contract buyer undertakes in SPA to perform contract on sellers behalf and indemnify seller for any liability arising under them

Question 29

what should buyer do re fundamental contracts (main customer or supplier)

Answer 29

buyer should defer entering spa until all necessary consents are obtained novation or enter fresh agreement (to renegotiate terms)

Question 30

warranties buyer may insist on re contract

Answer 30

that none of the contracts is of an onerous / unusual nature, or entered into otherwise than in the ordinary course of business seller is not in breach of any of the terms of thec ontract / waived any rights no event has occurred entitling other party to terminate or rescind seller has not sold or manufactured products which are defective/do not comply with warranties or reps made by seller

Question 31

can debtors (asset) / creditors (liability) be assigned to buyer

Answer 31

they can. if they are, full details to be included in a schedule or appendix to spa. s136 lpa requirement for written notice of assignment to be given to each debtor

Question 32

does seller remain liable to creditor on completion

Answer 32

yest unless they agree to release it

Question 33

what should seller do where parties have agreed to transfer creditors

Answer 33

seek an indemnity against buyer against such liability

Question 34

drawback to transferring debtor

Answer 34

difficult to value bok debts if they are transferred at face value, buyer suffers cash flow disadvantage and bear risk of irrecoverable debts

Question 35

how can buyer mitigate risk of irrecoverable book debts

Answer 35

discounted value to reflect uncertainty

Question 36

what should buyer do if seller retains debtor/creditors

Answer 36

to preserve good will, buyer should insist upon retention from PP released once creditors have been paid / undertaking not to issue proceedings to recover debt for a specified time after completion

Question 37

who takes responsibility for ongoing service/repair obligations

Answer 37

buyer can agree to perform sellers obligations and be reimbursed the cost

Question 38

why is it necessary to apportion outgoings to date of completion

Answer 38

seller will have incurred liabilities (utility co for gas, electricity, telephone etc) they must provide supporting documentation

Question 39

what is goodwill?

Answer 39

intangible asset difficult to value

Question 40

factors attributed to goodwill

Answer 40

good name, reputation, likelihood customer and suppliers will continue to deal with it

Question 41

how can goodwill be valued

Answer 41

apply multiplier to net profits

Question 42

what does acquisition of goodwill include

Answer 42

exclusive right of buyer to represent itself as carrying on business in succession and to use all trade names associated with it

Question 43

what would the seller be required to undertake re trading name

Answer 43

not to use the name, or any other name intended or likely to be confused with it, seller changes registered name to one approved by buyer and does not suggest any connection with acquired target

Question 44

general warranties re asset

Answer 44

ownership condition of fixed assets and stock business carried on in ordinary course since date of last accounts, turnover has not deteriorated seller has obtained all licences and consents necessary to carry on the business seller unaware of any suppliers or customers who will cease to deal with the business after completion seller has not been party to any agreement relating to business contraveining competition act, EA or TFEU seller not party to any litigation

Question 45

what happens under TUPE

Answer 45

employee contracts automatically transfer with undertaking as if originally mde between employee and buyer- no termination of contract

Question 46

when will tupe apply

Answer 46

to relevant transfer

Question 47

effect of tupe 4(1)

Answer 47

automatic transfer of contractual rights and obligations - employee has the same rights against transferee that they had against transferor

Question 48

who is covered by reg 4(1)

Answer 48

4(3) all employees employed by transferor immediately before transfer/employees who would have been so employed had they not been unfairly dismissed

Question 49

what happened in litster

Answer 49

employees were dismissed one hour before the transfer- 4(3) demonstrates that transferee is still liable for pre-transfer dismissal

Question 50

are employees covered where part of the business is transferred

Answer 50

only if they work in the part transferred

Question 51

test for whether an employee is assigned to relevant part botzen

Answer 51

question of fact- whether there is a transfer of the part of the undertaking to which employees were assigned and which formed the organisational framework within which their employment relationship took effect

Question 52

will transfer of contract occur if emploe objected

Answer 52

no 4(7)`

Question 53

what if employee refuses contract, can they be treated as having been dismissed?

Answer 53

4(9) yest if transfer involves a substanital change in working conditions to employees material detriment

Question 54

can transferree sue employee for a breach of contract committed against transferor prior to transfer

Answer 54

yest

Question 55

reg 6

Answer 55

transferee deemed to recognise trade union to the same extent as did transferor

Question 56

reg 5

Answer 56

collective agreements made with trade union by transferor deemed to have been made by transferree

Question 57

rights and liabilites which wont be transferred unter tupe

Answer 57

criminal liabilities provisions of occupational PS which relate to benefits for old age, invalidity or survivors

Question 58

what happens if employee is dismissed if the sole reason is for the transfer and is not an ETO reason

Answer 58

automatically unfair

Question 59

what if an ETO reason can be established

Answer 59

dismissal deemed to be either for redudancy or other substantial reason s98(1) ERA 1996 and 135

Question 60

what is an ETO reason likely to include

Answer 60

economic reason tehcnical reason (nature of equipment or production process) organisational reason (mgmt / org structure)

Question 61

ETO economic reason

Answer 61

must relate to conduct of business (profitability or market performance) and not simply to obtain an enhanced price wheeler

Question 62

ex of economic reason

Answer 62

administrator dismisses employees to keep the business afloat Crystal Palace

Question 63

change in workplace

Answer 63

there has to be a change in workplace composition, or substantial change in job description Berriman, or genuine redundancy situation

Question 64

reg 4(1)

Answer 64

employees entitled to retain same t&cs and must not be forced to accept inferior terms

Question 65

when can an employer change the t&cs of employment 4(4)

Answer 65

reason for change is an ETO reason terms of contract permit employer to make a change term varied is one incorporated from a collective agreement, provided the change take effece more than one year after transfer

Question 66

acceptable reason for changing terms in employment contract

Answer 66

if it was aimed at improving performance and efficiency

Question 67

warranties buyer may want

Answer 67

persons listed in schedule of employees are the only ones working or assigned to the undertaking being transferred details of any collective agreements and whether there is any actual or threatened industrial disputes there are no outstanding or pending claims that have not been disclosed the seller has complied with obligations to inform and consult with employees info concerning transferring employees provided in the disclosure letter is true and accurate

Question 68

what indemnities may a buyer want

Answer 68

costs or liabilities arising out of all outgoings (salary, commission, bonu, holiday pay) up to completion date any breach by seller of employment obligations prior to completion