Some founders embark on their entrepreneurial journey with the end goal of selling their business.

The founders could smoothen the sale process by ensuring their business are managed in compliance with basic legal requirements.

If you are one of those forward-looking founders, here’s how:

1. 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁𝘀
Ensure contracts which are meant to be entered by the target companies are entered by the correct companies (not by the founders personally or other companies owned by the founders). Make sure the terms are drafted properly to reflect the intention of the parties, and not some templates which contain inconsistent provisions.

2. 𝗗𝗶𝗿𝗲𝗰𝘁𝗼𝗿𝘀’ 𝗮𝗻𝗱 𝘀𝗵𝗮𝗿𝗲𝗵𝗼𝗹𝗱𝗲𝗿𝘀’ 𝗮𝗽𝗽𝗿𝗼𝘃𝗮𝗹𝘀
When the target companies enter into certain transactions or contracts, ensure the companies pass the necessary directors’ and shareholders’ resolutions, if required under the Companies Act or other relevant laws.

3. 𝗠𝗮𝗻𝗱𝗮𝘁𝗼𝗿𝘆 𝘀𝘁𝗮𝘁𝘂𝘁𝗼𝗿𝘆 𝗰𝗼𝗻𝘁𝗿𝗶𝗯𝘂𝘁𝗶𝗼𝗻𝘀
If the target companies have employees, register the companies as employers with the relevant authorities such as tax authorities and EPF. Comply with the statutory contributions in accordance with the relevant laws.

4. 𝗥𝗲𝗹𝗮𝘁𝗲𝗱-𝗽𝗮𝗿𝘁𝘆 𝘁𝗿𝗮𝗻𝘀𝗮𝗰𝘁𝗶𝗼𝗻𝘀
If there are transactions among companies owned by the founders, ensure the terms of transactions are rendered in writing through written contracts. Where required under the Companies Act, the founders who are also directors of such companies, need to declare their interest in the transactions in accordance with the Companies Act.

Issues discovered during due diligence may slow down the sale process as the potential buyers need to assess the risk and the parties need to agree on the solutions.

The issues may be addressed by getting indemnity from the founders, getting the founders to resolve the issues as conditions precedent, reducing the purchase price or retaining part of the consideration until the issues are resolved.

Founders may speed up the due diligence and negotiation of definitive agreements during the sale process by complying with the above.

This post first appeared on LinkedIn on 24 August 2023.