Based in Birmingham and Northampton, our team of commercial solicitors have in-depth experience of resolving disputes arising from business sales. We work proactively to ensure that disagreements are resolved without delay and, where possible, without recourse to the courts.
When a business is sold, the seller will provide a comprehensive package of information relating to every aspect of the organisation. The process of examining this information is called due diligence. It can be time-consuming and complex, but it is an essential part of ensuring that a buyer is fully aware of all aspects of the business they are taking on.
When something is not disclosed during the due diligence process, it can have serious implications for the buyer and can cause the business to fail, for example, if the financial position was not as expected or the full extent of a legal dispute was not disclosed. The buyer may be entitled to make a claim against the seller if the information provided was not accurate.
Due diligence on the sale of business shares
The information provided under the due diligence process will usually include the following:
- Company accounts and details of turnover and cash flow;
- Details of the assets included in the sale, to include evidence of ownership;
- Financial liabilities and debts;
- Evidence of the legal structure of the business, to include shareholders’ agreements;
- Copies of all contracts that the business has entered into, to include those with customers and those with suppliers. The buyer will want to know whether there is an option for them to continue with the contract after the purchase has been completed;
- The legal financial position, to include lease agreements, bank facilities and payment agreements in place with other parties;
- Commercial leases or other agreements relating to business premises;
- Ownership of intellectual property;
- Details of employees, to include contractual obligations;
- Information regarding any ongoing litigation that the business may be involved in.
If you are concerned that some of this information that you relied upon during the purchase of a business was inaccurate, you should seek legal advice to protect your interests as soon as possible.
If you are selling your business but are involved in an internal dispute with your shareholders or directors, you will need to try and resolve this before any sale takes place. For more information, see our article about dealing with disputes with shareholders or directors.
Disputes arising from flawed due diligence disclosures
If the information provided is incorrect or if the legal or accountancy team who dealt with the due diligence process on your behalf failed to uncover a problem or liability, then you may be entitled to make a legal claim.
The sale and purchase agreement will contain a number of warranties given by the seller in respect of the business. These will cover issues such as the business’s financial position, tax liabilities, share capital, contracts that the business is a party to, information regarding employees, intellectual property details and specifics of potential legal disputes.
If any of this information is subsequently found to be incorrect, the seller may have breached their warranty to the buyer.
In the event that you are involved in a dispute over the disclosure of information on the sale or purchase of a business, we can work with you to resolve the matter.
Where possible, we always endeavour to settle a claim without litigation. We will put your case robustly and negotiate and mediate where appropriate to reach an acceptable solution. If the matter cannot be resolved we can give you a costs/benefit analysis of taking the matter to court.
Contact us
At Witan Solicitors we have wide-ranging experience of dealing with disputes in respect of business sales and purchases across a range of sectors. If you are involved in a business dispute and you would like to discuss this with an expert company and commercial lawyer, email us at info@witansolicitors.co.uk or fill in our contact form.
