M&A Insights for Founders Who Want to Sell Their Business
- By : Wong Mei Ying
- Category : Linkedin Post, Mergers and Acquisitions
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, hereโs how:
1.ย ๐๐ผ๐ป๐๐ฟ๐ฎ๐ฐ๐๐
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.ย ๐๐ถ๐ฟ๐ฒ๐ฐ๐๐ผ๐ฟ๐โ ๐ฎ๐ป๐ฑ ๐๐ต๐ฎ๐ฟ๐ฒ๐ต๐ผ๐น๐ฑ๐ฒ๐ฟ๐โ ๐ฎ๐ฝ๐ฝ๐ฟ๐ผ๐๐ฎ๐น๐
When the target companies enter into certain transactions or contracts, ensure the companies pass the necessary directorsโ and shareholdersโ resolutions, if required under the Companies Act or other relevant laws.
3. ๐ ๐ฎ๐ป๐ฑ๐ฎ๐๐ผ๐ฟ๐ ๐๐๐ฎ๐๐๐๐ผ๐ฟ๐ ๐ฐ๐ผ๐ป๐๐ฟ๐ถ๐ฏ๐๐๐ถ๐ผ๐ป๐
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. ๐ฅ๐ฒ๐น๐ฎ๐๐ฒ๐ฑ-๐ฝ๐ฎ๐ฟ๐๐ ๐๐ฟ๐ฎ๐ป๐๐ฎ๐ฐ๐๐ถ๐ผ๐ป๐
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.
