Selling Your Business: Legal issues you should be thinking about

You’ve spent years building your business and your team — the long hours, the sleepless nights, the highs and lows that come with growing something from the ground up, and now, you’re thinking about selling your “baby.”

Perhaps you’ve been approached by a potential buyer, or maybe it simply feels like the right time to sell. Either way, preparing for a sale can be both exciting and daunting.

Taking time to identify and address key legal issues early will help you get your business “sale ready” and can help you avoid potential deal breakers or value reductions down the line.

Here are some practical steps you can take in the lead-up to a sale to help make the process smoother and maximise the value of your hard work.

Review statutory registers and ensure all public records are in order

Irish companies are legally obliged to maintain the following registers under the Companies Act 2014:

• Register of Directors

• Register of Secretaries

• Register of Members

• Register of Directors and Secretaries Interests

• Internal Register of Beneficial Ownership

Potential buyers will look for fully comprehensive and up-to-date company registers when they purchase the company, so it is important that your company has complied with the statutory obligations and has accurately maintained all its internal records and registers.

Similarly, all outstanding Companies Registrations Office and Central Register of Beneficial Ownership filings should made in advance of the sale process, and the public records should accurately record all fileable events in the Company’s lifetime and reflect the current state of the business.

Ensure company accounts and financial records are in order

It is essential that the company’s accounts and financial records are up to date, clear, and accurate before commencing the sale process. Engaging an accountant or financial adviser to review the company’s financial position—including balance sheets, cashflow statements, and tax records is a worthwhile exercise that can save significant time and help identify and address potential buyer queries in advance.

Conduct a company-wide employment contract review

Ideally, every employee should have an up-to-date, signed employment contract that accurately reflects their current terms and conditions. Before selling your company, it’s worth conducting a company-wide review of all employment contracts to ensure they are current and compliant.

In particular, make sure that key senior employees are bound by appropriate restrictive covenants within their contracts. These provisions help safeguard the business if a senior employee departs after the sale by preventing them from using insider knowledge or competing with the company for a defined period.

Well-drafted covenants protect the company’s legitimate business interests and can also enhance buyer confidence during the sale process.

Identify the company’s top suppliers and customers, and their associated terms and conditions

The buyers will, above all else, be interested in the company’s most lucrative customers and the company’s key suppliers. Therefore, it is important to ensure that the company’s contracts with these parties, or the operative trading terms and conditions underpinning these relationships are readily available. Where there are no terms and conditions or contract in place, efforts should be made to formalise these relationships in advance of the sale. Having these contracts and terms in order before commencing the due diligence phase helps minimize unnecessary buyer requests and saves considerable time.

Make sure any intellectual property used by the company is protected

If the company owns valuable intellectual property such as a distinctive brand, logo, or a revenue-generating invention, it is essential to ensure that these rights are properly owned by the company itself and, where appropriate, that they are registered in Ireland, across Europe, and internationally. Clear ownership and registration of intellectual property not only protect the business’s core assets from being copied by competitors, it also enhance the company’s value and appeal to potential buyers.

Where valuable intellectual property used by the business has been created or designed by employees or contractors, it’s important to ensure that ownership of those rights is clearly assigned to the company. During the employment contract review, appropriate intellectual property assignment clauses should be included in updated employment contracts, or separate assignment agreements should be put in place with the relevant individuals. Taking these steps ensures that all key intellectual property is properly owned by the company ahead of a sale.

Find an experienced deal team

In Ireland, a typical deal team comprises corporate finance advisors, accountants, tax advisors, and solicitors. Given that the sales process can be complex, multifaceted, and prolonged, it is essential to assemble a trusted team of experienced advisors who collaborate well and can manage the sale in the most efficient and effective manner.

Contact Us

For more information on this or any other topic, please contact Chelsey Heaney or any other member of the Power Law team.