Tips for selling a Business in SA
Building up a business from scratch, or improving a business you bought, is a profound milestone.
Selling your Business when you are ready to move on is a great moment! But you don’t want to ruin that by missing steps in the process.
It is important to comply with your legal requirements to provide the purchaser with a Form 2 – Vendor’s Statement. This statement must be supplied to the purchaser of a small business and is governed under the Land and Business (Sale and Conveyancing) Act 1994. A small business is defined under the Act as one which the total purchase price for the business is $300,000.00 or less.
What information does the Form 2 include?
This document includes details relating to the business being sold, is in the form prescribed by the Act, and must include:
- The purchaser’s “cooling off” rights,
- Prescribed particulars including a summary of the financial performance of the business,
- The depreciated value of the plant and equipment being sold,
- Trading statements for the last 3 financial years,
- Other particulars including the period the vendor has been carrying on the business and trading from the premises,
- Lease terms and employee details,
- A certificate signed by or on behalf of a qualified accountant.
The Form 2 discloses all the information to the purchaser that could affect their purchase of the business. If the purchaser is unsatisfied with the information contained in the Form 2 they have the right to withdraw from the contract during the “cooling off” period.
When does the “Cooling Off” period Start and Finish?
A purchaser is entitled to withdraw from a contract during the “Cooling Off” period by providing written notice to the vendor or agent acting on behalf of the vendor. The period commences on the next business day after the Form 2 is served and expires on the fifth clear business day after it was served.
When a purchaser exercises their cooling off right, they are entitled to the return of money paid (deposit) under the contract.
Not all purchasers of businesses have the right to cool off. For instance, if the purchaser has obtained independent legal advice and obtained an approved certificate waiving their rights. This is usually required where the settlement of the business is urgent, and the purchaser agrees to waive their rights.
When will I receive the Form 2?
The Form 2, that has been signed by the Vendor, must be provided to the purchaser no later than 5 business days before the settlement date.
What happens if you fail to serve a Form 2?
It is an offence under the Act not to comply with the statutory requirements and it carries penalties which could lead to serious consequences for the Vendor. This could include, but not limited to, the purchaser “walking away” from the transaction before settlement, or if the settlement has passed, the purchaser may seek a remedy under the Act or at Common Law.
Why Contact Strathalbyn Conveyancing?
Our team are experienced in the preparation of Business Contracts and Form 2 Statements. We can act for both Vendors and/or Purchasers in business settlements and provide advice regarding the process.
And don’t forget, we are also available to help with your residential property settlements and can act for either the Seller, or the Purchaser.