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Business Acquisition

Business Acquisition

Buying business involves at least two transactions. One involves purchasing a business while the other transaction deals with the lease of the Premises.

Unlike property conveyance, the Vendor is not obliged to disclose and generally will withhold critical information from you regarding the Business. The principle of caveat emptor (let the buyer beware) applies. In most circumstances, once you have signed the Contract to purchase a Business, you will have to complete the purchase as you do not enjoy any statutory warranties unlike a purchaser of a real property.
Hence, it is very important for you to undertake pre-exchange due diligence before committing yourself to a Contract. Before exchange of Contract, we recommend you to undertake the following steps:

1. Reviewing the terms of the existing lease or engaging in new lease negotiation;
2. If the Vendor is a company, a company search on the Vendor to see whether there are existing charge on the company’s assets;
3. Examining current employees entitlements (as new employer may be liable for unpaid worker’s entitlements in some circumstances);
4. Checking whether the current Business has a valid Development Consent or has received any Notice of Breach issued by local councils.
5. If the Vendor is registered for GST, you should register for GST before settlement in order to avoid paying additional 10% GST.
6. Conducting an inspection of the Shop/Premises, Equipments and trading stocks;
7. Investigating the profitability of the Business by seeking advice from your accountant or business advisor.
8. Ensuring you have sufficient fund to complete the purchase.

Prior to exchange, we will go through the Contract and the current lease with you. We usually would suggest amendments to the Contract. If a new lease is required, we recommend clients to reach agreement with the Landlord as to the terms and conditions of the New Lease before exchange. We do not recommend you to sign the Contract without knowing the terms and conditions of the New Lease.

Once contract has been exchanged, we will ensure your matter proceeds smoothly to settlement including contacting the Landlord for a new lease or transfer of the existing lease. We also recommend you to undertake appropriate post-exchange due diligence before settlement so as to ensure the you can obtain the legal title of the Business and trading stocks on settlement.

Although these reports and searches are at your expense, we strongly believe a small outlay now may prevent an unexpected large outlay at a later date should problems arise.