Commercial law

Preparing your business for the future - top tips for business owners seeking to future-proof their companies.

Judith Fairley and Lisa Gray, Directors at HRJ Foreman Laws Solicitors in Hitchin and Welwyn Garden City give their top tips for business owners seeking to future-proof their companies.

Succession planning for your business is critically important if you want to maximise the fruits of your labour. Perhaps you are thinking about selling your business, planning for your retirement, inviting new shareholders onboard or acquiring another business.   

Whatever position you are in - preparation is key.  By taking early action and making it a part of your short or long term strategic plan, you will ensure your business is set up in a way that allows you to more easily pursue such routes in the future.

In a ‘business for sale’scenario it is essential to take legal advice at an early stage on the appropriate method for the sale and also to prepare for the buyer’s due diligence process.  An experienced commercial law solicitor can add real value to your company.  A key part of the process will be to carry out a legal ‘health check’ that will help to make the process as smooth as possible.

 There are a number of areas to consider as a part of your company health check.

1. Ensure your documents are in order

A buyer will need to know all your significant business contracts are in order and that none of these key contracts or key staff will be lost as a consequence of the sale. You should consider your customer and supplier contracts, leasing agreements, maintenance contracts and your employee contracts.

Do you have a shareholders agreement which gives you control over the sale process?  If you have minority shareholders this will need careful management.

Have you tackled ownership and licensing of any intellectual property rights in your business correctly? 

Do you need to re-address how your business is financed?   Factoring and invoice discounting arrangements often need to be unravelled.

2. Realise the value of your business

Have a clear objective as to how you want to structure the deal with your buyer and the monies that are due on completion.  Deferred payments, earn-outs and escrows require careful review and agreement.  If you are agreeing to a deferred payment that is based on future targets can you be certain the business will be managed in the same way? 

3. Resolve disputes

If your company is involved in any significant disputes you should seek to resolve them first. 

4. Research your buyer

It is important to research your buyer and understand how they are financing the purchase.  If they are a competitor you will need to ensure you are not breaching any competition laws.  You may also need a confidentiality agreement in place before you share any sensitive information with them.

5. Keep in regular touch with your advisers

Provide regular feedback to your accountant and solicitor and other advisers and request open communications in return. This helps to speed things up and creates positive working relationships.  It also helps your advisers to support you further when questions arise, for example, how should you react to specific concerns from the buyer during the due diligence process?

6. Don’t forget the day job

The business commitments to your customers must remain a key priority during any transition. Your advisers will manage the process for you wherever possible, and should be helping to free up your time to focus upon the day-to-day demands of the business.

For advice email us at info@hrjforemanlaws.co.uk. 

Or call us: Hitchin, 01462 458711.  Welwyn Garden City, 01707 887700. London, 0203 3279001