Guide to our Business Transfer Agreement

Posted by Stephen on 22nd November 2015

This is a shortened version of the guide to our Business Transfer Agreement template that is for use when a business is being sold by way of an assets sale or a business sale. (The full guide is provided with the template when you purchase it.)

This agreement incorporates various options, so it is appropriate:

1. the vendor is a company, a partnership or a sole trader;

2. the purchaser is a company, a partnership or a sole trader;

3. whether there are any employees of the business or not; and

4. for most different types of business.

This template is not appropriate to be used where the purchaser is purchasing some or all of the shares in a company (i.e. a share purchase). In such a case, the company would come with all the potential and actual liabilities that it already has, which might be unknown to the purchaser, including tax liabilities.

Avoiding significant problems for the purchaser with such a purchase is a complex task and great care needs to be taken. It is not appropriate to carry out such a transaction on a DIY basis, without the assistance of legal advice from an experienced corporate lawyer who specialises in company and business sales – in particular, much protection for the purchaser would be needed around the warranties and tax covenant/indemnity.

The template is not appropriate to be used for mergers or take-overs of charities. A more simplified transfer agreement would normally be used for that.

The agreement presumes that the purchaser is not paying a very significant amount to buy the business (e.g. under £30,000). If this is not the case, then the purchaser should take legal advice on the whole transaction from an experienced corporate lawyer who specialises in company and business sales, as much more detail would be desirable around the warranties, in order to reflect the greater risk the purchaser is taking by paying more for the business.

In this agreement we have pared the warranties (see the heading “Warranties” below) down to their minimum, in order to (a) keep the document to a manageable length and (b) seek to avoid burdening the purchaser and vendor with a detailed “disclosure” process (the process of the vendor’s disclosing actual of potential breaches of the warranties in a separate letter known as the “disclosure letter”, which seeks to limit the vendor’s liability under the warranties by informing the purchaser of any issues before the transaction is signed), for which you would really need the services of that experienced corporate lawyer again.

This template presumes:

  • the purchaser has carried out whatever investigations it feels are needed, e.g. (a) having the accounts analysed to check the underlying profitability and value of the business and that it is worth what is being paid for it and (b) a physical inspection of the condition of the main assets to check they are in working order;
  • the purchaser does not require that the obligations of the vendor are guaranteed by a third party such as the shareholders or parent company (this can be a risk if the seller is disposing of its entire business, so that after the sale it will only be a ‘shell’ holding cash which can be extracted by the shareholders as a dividend thus leaving nothing to pay later warranty claims), on the basis that the value of the business is relatively low and the warranties are relatively brief; and
  • that either the purchaser is not taking over any premises or they are leased (i.e. that it is not buying freehold property) – this is the most common situation with asset or business purchases.

Warning note

While this guide is provided to make completing the template easier for you, this is one of the more complex contracts and presumes a fairly high degree of competence and familiarity with the legal issues concerning the sale, purchase or transfer of businesses. You may choose to make adaptations to the agreement that we have not provided for. If you are not happy to assume responsibility for these matters, then you might be better served by instructing a solicitor who is experienced in corporate law (selling businesses).

In practical terms, no vendor should ever hand over control of the business or any assets to the purchaser until (a) the written contract has been agreed and signed by both parties and (b) it has been paid in full in cleared funds. This might be stating the obvious to some people, but in our previous experiences as corporate lawyers we have seen instances where it has gone horribly wrong where the vendor has not taken legal advice, as the vendor has been too trusting and the purchaser has turned out not to be trustworthy, indeed has been a conman in some cases (and vice versa).

That said, as it can often be the case that part of the purchase price is paid later, this agreement can be adapted to cater for that possibility – see the commentary on clause 4 below.

Warranties

This agreement is drafted in order to give a basic level of protection to a purchaser as the caveat emptor principle applies (“purchaser beware”), meaning the purchaser is otherwise at risk if he does not get some warranties from the vendor. Warranties are just like when you buy a car – you would want a warranty that it is mechanically sound and buying from a private vendor without a warranty can be quite a risk – you would want a good look at it and a test drive. Buying a business is more complex than that in most cases, as there is more that can go wrong or already be wrong with it and it is hard to have any sort of a ‘test drive’ of it. Also you cannot give it back if you don’t like it. All you can get is some money refunded in compensation if any of the warranties are untrue.

If there are particular areas that are important to the purchaser (or particular aspects of the business that are valuable to the purchaser), then the purchaser would want suitably-worded warranties about them that go into more detail than the basic warranties we have set out in clause 5. Again the purchaser should see that experienced corporate lawyer in order to obtain suitable protection. If the purchaser adds warranties, the vendor might need to consult such an independent lawyer to ensure its interests are not prejudiced and the arrangement is balanced.

As noted above, in this template the warranties are not guaranteed by a third party and there are therefore some risks that the vendor may have no funds available later on to cover warranty claims when they arise.

‘TUPE’ Regulations

In simple terms, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (commonly known as the TUPE regulations) apply when you buy a business that has employees. They mean that the purchaser must take on all of the employees who are wholly or mainly working there. The purchaser cannot simply (a) cherry-pick the best employees and refuse to take the others or (b) refuse to take any employees on. TUPE preserves all of the terms and conditions of the employees and also their length of continuous service. This is commonly misunderstood by purchasers or they presume they can easily avoid TUPE – it is not there to be avoided and the best policy is careful compliance. There are significant penalties for failures to comply with TUPE.

Another aspect of TUPE is that is means that the purchaser takes over all the vendor’s liabilities to the employees (e.g. unpaid salaries, personal injury claims and discrimination claims), some protection for the purchaser has been built into this template in the form of the warranties at clause 5 (most of which relate to the employees) and the indemnities from the vendor at clauses 8.2 and 9.2.

The vendor will need to comply with its obligations under TUPE (a) to provide the purchaser with information on the employees and (b) to inform the employees in good time of the fact that a transfer is about to take place and consult the employees over whether the purchase is likely to make any permitted changes as a result (e.g. moving the business to a new site). A discussion will be needed to establish if the purchaser is intending making such changes. If changes are envisaged, then consultation needs to take place with the employees and this should be done in good time. This means a week or two before completion of the sale, so plan ahead.

After completion of the purchase, the purchaser should issue all the employees with new written contracts in the purchaser’s name, but with no changes to their terms. For tax purposes, P45s should also be issued by the vendor to all employees.

The purpose of this guide is not to provide detailed advice in relation to TUPE (that is beyond the scope of this guide), but just to point out that it applies and that the business transfer agreement has taken this into account – see clause 9 and schedule 3.

If you would like more information on the Transfer of Undertakings (Protection of Employment) Regulations 2006, please see the ACAS guide to TUPE.

Pensions

This standard document does not include detailed pensions provisions, as it assumes that there is no final salary or other group occupational pension scheme. You need to take legal advice from a specialist if there is one and should not use this agreement yourself without such advice. If the vendor only operates personal pension schemes for its employees, such as those available under ‘NEST’ (i.e. the compulsory automatic enrolment to workplace pensions) and the previous Stakeholder scheme, and or makes payment directly into the employees’ own personal pension funds, then this is OK – see clause 14.

Clauses in this Business Transfer Agreement

Date – Insert just the year at this stage. Handwrite the rest of the date in the agreement once all the parties have signed it.

Party clauses – You will need to insert the names and addresses of party 1 (the Vendor) and party 2 (the Purchaser). The draft presumes both are limited companies.

Numbered clauses

1. Interpretation – This clause defines the main terms used in the agreement.

  • “Accounts” – Select whether your accounts are routinely audited or not. As regards the words in square brackets on lines 2 and 3, if the vendor runs other businesses through the same company and is, for example, only selling one division, then delete option 1 and keep option 2. If not, keep option 1 and delete option 2.
  • “Accounts Date” – Fill in the date your last set of annual accounts are made up to.
  • “Assets” – This refers to the assets of the business that are being sold in generic terms. Schedule 1 also sets out a generic list. If there are specific key assets that the purchaser is keen to set out in writing to avoid any doubt, then this can be done here or in Schedule 1 using the following additional words: “The Assets include the following: [LIST]”, and then insert the list of specific items, how many of each there are and identify them sufficiently, e.g. by model type.
  • “Book Debts” – This refers to any sums still owing to the Vendor, e.g. by customers to whom the Vendor has given credit. These debts are generally left with the Vendor  (they are part of the “Excluded Assets” – see below) and are for the Vendor to collect.
  • “Business” – Insert a short description of the business type and its trading name. If the Vendor runs more than one business through its company, then the division being sold here should be clearly identified.
  • “Business Information” – This is self-explanatory.
  • “Business IPR” – This refers to the intellectual property rights associated with the business, e.g. trademarks, copyright, etc.
  • “Business Name” – Fill in the trading name of the business here. If the purchaser wants to ban the vendor from using any of the individual words or a phrase that makes up the trading name, then set them out in the second half of the definition that is in square brackets – if not, delete that section. If the business has more than one trading name, list them all here.
  • “Completion” – This refers to the date the business is sold/transferred to the purchaser.
  • “Completion Date” – This definition assumes the completion date will be on the date the agreement is signed and dated. If you are signing shortly before the completion date, then change the wording to the date shortly in the future that you have chosen.
  • “Contracts” – This refers to on-going contracts that the purchaser is to take over and complete. This might be customer orders or contracts for goods or services to be supplied to the business that the purchaser wants to continue (e.g. annual servicing contracts or licences) or take over, e.g. stock ordered but not yet delivered or not yet paid for.
  • “Creditors” – This means money the Vendor owes – these debts are left as the responsibility of the Vendor to settle – the purchaser does not take over responsibility or liability for them.
  • “Deposits” – Where the vendor has received any deposit in relation to customer contracts that the purchaser is to take over and fulfil, then the vendor must pay this money over to the purchaser – see clause 7.1.
  • “Disclosure Letter” – This refers to the letter disclosing issues with the warranties – see the note on clause 5.1 below. If there is not to be a disclosure letter, then delete this definition.
  • “DPA” – This is self-explanatory.
  • “Employees” – The names and other details of the employees of the business to be taken over should all be listed in Schedule 3. See the note on ‘TUPE’ Regulations above about the purchaser taking on the employees.
  • “Encumbrance” – This is self-explanatory. The assets to be bought should be free from any encumbrance.
  • “Excluded Assets” – Where the vendor wishes to reserve some of the business’s assets or they relate to other divisions or they are other assets that are not to be sold to the purchaser, then this can be made clear in clause 2.2, e.g. cash in hand or at the bank or book debts.
  • “Excluded Contract Liabilities” – This refers to any payments due from the Vendor prior to the Transfer Time, including under the Contracts. If there are payments that have not yet fallen due, such as for stock ordered on credit (whether it has arrived or not by the Transfer Time), that are not yet due for payment, then the purchaser will be liable for them, as it is taking over the “Contracts” and these are not payments that fell due for payment prior to the Transfer Time. See also the definition of “Excluded Liabilities”. In relation to stock that still needs paying for, see the warranty at clause 5.2.2, which requires the vendor to state to the purchaser what is owing. NB The value of such unpaid-for stock would be nil for the purposes of the valuation in Schedule 1 pursuant to the stock take required by clause 3.2.
  • “Excluded Liabilities” – Coupled with clauses 2.2 and 8.2.1, this states that the Vendor remains liable for things that should have been done before the Transfer Time.
  • “Fixed Assets” – This refers to the longer-term assets of the business, e.g. computers, plant and equipment. If the business’s current premises are not rented, such that there are no “landlord’s fixtures and fittings”, then delete the words in square brackets.
  • “Goodwill” – This is self-explanatory.
  • “Interest Rate” – Check if you are happy with the suggested interest rate, which will apply to late payments under this agreement (see clause 17.7).
  • “IPR” – This is a definition of intellectual property rights (as used in the definition of “Business IPR” – see above).
  • “Lease” – If the business’s current premises are not rented, then delete this definition. If they are, then fill in the details of the title number if the lease is registered at HM Land Registry – if not, then delete the second half of the definition that is in square brackets.
  • “Leasehold Property” – If the business’s current premises are not rented, then delete this definition. If they are, then fill in the address of the premises.
  • “Lease Transfer Date” – If the business’s current premises are not rented, then delete this definition.
  • “Licence” – If the business’s current premises are not rented, then delete this definition. If they are, then you will most likely need a licence (written permission) from the landlord to assign the lease from the vendor to the purchaser.
  • “Prepayments” – Where the vendor has paid in advance for anything for the business, these prepayments will be recouped from the purchaser – see clause 7.2.
  • “Price” – The purchase price is to be set out in clause 3.1.
  • “Purchaser’s Group” – If the purchaser is not part of a group of companies, then delete this definition and all references to it throughout the template.
  • “Records” – This refers to the business’s records, which are to be handed to the purchaser on completion.
  • “Stock” – This means the stock the business holds as at the Transfer Time. Any stock ordered but not yet delivered would come under the “Contracts” the purchaser is taking over. A stock take will be needed and is best done on the day of completion (see clause 3.2) and the price for the stock agreed there and then, in order to avoid complications in the drafting of this agreement.
  • “Tax” – This is self-explanatory.
  • “Third Party Consent” – This refers to any permissions that might be needed to transfer any assets, including any contract, to the purchaser.
  • “Third Party Rights” – These are claims the vendor might have against others relating to the running of the business before the Transfer Time – these rights are being retained by the vendor (see the list of Excluded Assets in clause 2.2).
  • “Transfer Time” – This refers to the point (for accounting and other purposes) at which the business passes to, and future risks relating to it are assumed by, the purchaser. You can change it to another point if you prefer, but the end or start of a day are generally the easiest for accounting purposes.
  • “TUPE” – This is self-explanatory.
  • “VAT” – This is self-explanatory.
  • “VAT Records” – This is self-explanatory.
  • “Vendor’s Group” – If the vendor is not part of a group of companies, then delete this definition and all references to it throughout the template.
  • “Warranties” – This is self-explanatory. See the note headed “Warranties” above as to their purpose.

2. Business sale – Clause 2.1 confirms the sale of the assets will be free from encumbrances. Clause 2.2 sets out the “Excluded Assets”. If there are any specific other assets that would be considered part of the business but that the vendor wants to retain, then they should be added to this list. Delete clause 2.3 if the business does not occupy rented premises. If there is a lease to be taken over by the purchaser, then keep clause 2.3 and liaise with the landlord to obtain permission in the usual form – a licence to assign. If the lease is registered at The Land Registry, then the assignment itself will use form TR1 – if not, then delete these last few words in square brackets from clause 2.3. Clause 2.4 refers to the split (or apportionment) of the price between the various classes of assets being sold – this should be completed in Schedule 1.

3. Price – Clause 3.1 refers to the price as per the total in schedule 1. Clause 3.2 refers to the need for a stock take to be completed – ideally this is to be done on the day of completion before the contract is signed and the deal completed. Insert the agreed stock take figure into Schedule 1. Clause 3.2 states that the stock will be valued at the lower of cost and the wholesale market value. Clause 3.3 is merely potentially to save the vendor a little capital gains tax (if relevant): if there is a breach of a warranty, then the money that needs to be handed back to the purchaser by way of damages for the breach of warranty has the effect of reducing the sale price.

4. Completion – This clause sets out the various things that must occur at the point the business is being sold: “completion”. Please look at the details, which are set out in paragraph 1 of Schedule 2. In clause 4.3.1 fill in the details of the vendor’s bank account into which the purchase price is to be paid.

Clause 4.3.1 assumes that the full price is being paid on completion in one lump sum. If this is not the case, you will need to adapt the clause. The easiest way to do this is to have a separate loan agreement to deal with the payment of the instalments and state whether interest is to be paid on them. Cross-refer to the loan agreement in clause 4.3.1 (to specify the amount of the purchase price being paid by instalments under the terms of a loan agreement in the agreed form) and clause 4.3.2 (to add reference to handing over a signed loan agreement in the agreed form at completion – if the vendor is taking security for the deferred payment, then also refer in clause 4.3.2 to the handing over of the document creating that security, such as a legal charge or debenture, with, in either case, such document being in the agreed form).

We do not advise the vendor to accept payment by instalments without taking adequate security, e.g. a legal charge over valuable property of the purchaser; a debenture over all of the assets of the purchaser if a company; a personal guarantee (see our template for a guaranteed loan agreement) by a shareholder/director if the purchaser is a company, coupled with a legal charge over valuable property of the guarantor. Even then, credit should only be given if the vendor trusts the purchaser and knows it and its owners well. Separate templates for loan agreements (either simple, secured or guaranteed) and security (such as a debenture or legal charge) are available from Legalo for this purpose.

In terms of completion, the vendor should only confirm completion has taken place once it has been able to verify with its bank that the price has been transferred in to its account in full. Only then can the vendor hand over control of the assets and the running of the business to the purchaser.

If the purchaser is not a company, then delete clause 4.3.2.2. Clause 4.6 refers to the post-completion matters the vendor must later attend to: see paragraph 2 of Schedule 2.

5. Warranties – As noted above, some basic warranties have been included to give the purchaser a measure of assurance that it is buying a decent business. The warranties only have to be true as at the point the company is sold – the Completion Date – so they are a snapshot of the business as at that point. If it later turns out that a warranty was not true on that date, then the purchaser may have a claim against the vendor for his resulting loss. The vendor should carefully consider each warranty to check it is true and accurate. Some warranties require the vendor to have given the purchaser copies of contracts and other information – please go through these carefully and ensure complete and accurate copies of the necessary information are passed to the purchaser in good time in advance of the day scheduled for completion. If any of the warranties is not true, then the vendor should set out in a separate letter to the purchaser (before this agreement is signed and dated) the ways in which the warranties are not true or accurate – this would be a basic form of disclosure letter, but should be sent as a draft well in advance of the date scheduled for completion to the purchaser for approval. If the purchaser is not happy with what is being disclosed, the price may need to be adjusted. (You are advised to seek independent legal advice if you wish to use a disclosure letter.) Alternatively, the warranties could be re-written so that they were true as redrafted or the warranties that were not true could be deleted. Clause 5.1 refers to the possible use of a disclosure letter – if this is not being used, then delete the words in square brackets. If any warranty claim is later brought by the purchaser, we would advise the parties each consult specialist lawyers at that point.

6. Limitations on warranty claims – Subject to clause 6.3, there are some limits on what the purchaser can claim back from the vendor under the warranties in clause 5 – see clauses 6.1 and 6.2. We have kept this clause 6 fairly basic, as the warranties are stripped down in the first place. A vendor might want more protection here, particularly if the warranties were added to. In clause 6.2 fill in the number of years the purchaser has in order to bring a claim under the warranties. This is typically between 1 and 3 years. In practice most warranty claims are spotted by the purchaser within the first year.

7. Apportionments and prepayments – This clause deals with the other money that may need to be passed between the purchaser and vendor, depending on the type of business involved. If the leasehold property is not being taken over by the purchaser then clause 7.3.2 should be deleted. Do not forget that there should be a balancing payment under clause 7.3.3 in relation to any accrued holiday rights of the employees who are transferring over to the purchaser: if they have taken more than their fair proportion of holidays for the holiday year to date, then the vendor needs to make a payment to the purchaser, and vice versa. If there is no periodical income of the business, then clause 7.4 can be deleted (and the reference to clause 7.4 in clause 7.5.3). Clause 7.5 states that the parties will try to agree the overall amount owed by one to the other. If this is not possible, then there is a mechanism in clause 7.6 to resolve it via a third party, without the need to go to court.

8. Indemnities – This clause states that (a) the purchaser will be responsible for obligation in the Contracts that it is taking over that fall due for performance after the Transfer Time and (b) the vendor will be responsible for the obligations that were due for performance before the Transfer Time and payment of the Excluded Liabilities. Each indemnifies the other against loss resulting from breach of this by it.

9. Employees – This clause refers to TUPE applying and there being a transfer of employees from the vendor to the purchaser in accordance with TUPE. If the vendor has failed to comply with TUPE (e.g. it did not warn the employees in advance that a transfer was about to take place, as noted above), then, under clause 9.2.1, it must indemnify the purchaser against loss caused by this (as the purchaser can be liable alongside the vendor according to the TUPE regulations). There is also an indemnity in case the vendor has failed to tell the purchaser about other employees who should have transferred to the purchaser in accordance with TUPE – see clause 9.2.1. The remaining aspects that relate to employees are dealt with in the warranties at clause 5.

Clause 9.3 is optional – if the shareholders and/or directors of the vendor work in the business and are (or might be) classed as employees, then if they are not to transfer to the purchaser, they can refuse to transfer to the purchaser. They could sign a letter refusing to transfer – a template for such a letter is available separately from Legalo. If they are not employees and, as such, will not transfer to the purchaser, then delete clause 9.3. If they are employees and will transfer to the purchaser, then delete clause 9.3 and simply include them in the list of employees in schedule 3.

10. Contracts – This clause deals with the contracts that are ongoing at completion and that the purchase has agreed to take over and complete. As noted above, these generally fall into 2 classes: (a) contracts with customers that need completing; and (b) contracts for the supply of goods/services to the business that the purchaser wants to continue. Most contracts are freely assignable unless (a) they have been signed as deeds, (b) they include a clause stating they are not assignable without consent or (c) they involve personal duties that cannot readily be provided by the person they are to be assigned to (e.g. contracts for legal services or the contract of an employee if the employee is trying to assign it to another employee). Those that are not freely assignable will need to be “novated” – the vendor should contact the other party in such cases and see if a novation can be agreed. Legalo has a template deed of novation available for this purpose. Two points to try to avoid in any such novation are (a) making the purchaser responsible to the third party for any acts or omissions of the vendor that occurred prior to the date of completion and (b) the third party releasing the vendor from such earlier acts or omissions (on the basis that the purchaser takes responsibility for them).

11. Book debts – This clause has been drafted on the basis that the vendor remains the owner of the debts due to it from the operation of the business prior to completion. Clause 11.2 states that the vendor will notify the purchaser before taking legal action to collect the debts if the customers have not paid them.

12. Restrictive covenants – This clause provides that the vendor will not set up in competition with the purchaser shortly after selling the business and its goodwill to the purchaser. In paying for the customer connections of the vendor (the goodwill), the purchaser is effectively entitled to keep the vendor out of the same market for a while. The clause should however be for the same market (both in type and in the geography of where it operated) and only for a few years. If it is excessively long or wider than the original market of the vendor (in type or geography), then it may be unenforceable in the courts in the event that the vendor breaches it. To stop this being easily circumvented, clause 12.1 states that the restrictions also apply to the vendor’s shareholders and directors and other companies in the Vendor’s Group.

In clause 12.1.1, fill in the number of years it will last on the first line: 2 to 5 is normal (perhaps a short period if the price being paid for the goodwill is not substantial). If this is a sale where the vendor is to retire, then this should not pose a problem for it. Fill in the period on line 3 in which customers who have not placed an order recently might still be expected to return or reorder from the business – up to 2 years is normal, but this should relate to the business in question. The same period should appear in the penultimate line of clause 12.1.1. In clauses 12.1.2 to 12.1.5, fill in the number of years it will last on the first line – this should be the same as clause 12.1.1. The second and third numbers in clauses 12.1.2 should be the same as those in clause 12.1.1.

The second number in clauses 12.1.3 should be the same as that in clause 12.1.1. In clause 12.1.4, the restriction on poaching staff should only apply to senior staff as currently drafted – it may become unenforceable if you extend it to include junior staff.

In clause 12.1.5 fill in the geographical area (e.g. by country, by county or by reference to a radius of a certain number of miles from the business’s current premises) within which the majority of the customers of the business are based. The wider the area, the shorter the term of the restriction should perhaps be to keep it reasonable.

13. Confidentiality and announcements – This clause seeks to protect the business’s confidential information from future use by the vendor, again on the basis that the purchaser is paying for the goodwill and know-how of the business.

While this clause is related to clause 12, the restriction on mis-using the confidential information lasts for an unlimited time after completion (subject to its ceasing to be confidential – see the last sentence of clause 13.2).

Often a joint announcement concerning the purchase of the business will be agreed – clause 13.4 gives the purchaser more freedom in this regard, while 13.3 restricts the vendor.

14. Pensions – This clause provides that the vendor and purchaser will co-operate in respect of the administration hand-over regarding any NEST pensions in place for the employees. The warranties effectively include a warranty that all the vendor’s contributions into any NEST or other pension have been made (see clause 5.2.17).

15. VAT – If the vendor is VAT registered, then all its sales are normally subject to VAT. The sale of the business would be no different were it not for an exemption available if the business is sold as a “going concern” (hence the reference to this in clause 2.1) and both the vendor and purchaser are VAT registered (or the purchaser becomes VAT registered shortly after completion).

16. Data protection – There may be questions over whether the vendor is entitled to sell the personal data of customers to the purchaser – if its terms and conditions do not provide for this (e.g. in its privacy policy), then it might not be so entitled. If not already so registered, the purchaser should obtain a registration with the Information Commissioner’s Office if it will hold/use/process personal data after completion.

17. Miscellaneous – This clause deals with some minor, but helpful, points. Clause 17.7 states that interest is due on late payments at the Interest Rate.

Schedule 1 – As noted above, a split of the purchase price between the different classes of assets should be completed here. We have suggested that only a nominal value of say £1 should be allocated to certain types – see the schedule. You can change this if it is felt they have a more significant value. If there are no other classes of assets then delete the last entry before the total.

Schedule 2 – Paragraph 1 sets out what the vendor must give to the purchaser on completion. Some of these items may not be needed, but this also serves as a checklist. If there is no lease to transfer or the transfer documents are not ready to be signed at completion (e.g. if the landlord has not yet issued or finalised them), then delete paragraph 1.1(b). If there is no lease to transfer, then also delete paragraph 1.1(c). If there are no vehicles being sold, then delete paragraph 1.1(g). If the vendor (as a company or LLP) does not need to change its name, then delete paragraph 1.1(i). If the vendor’s bank has a debenture or other charge over the assets of the vendor, then in order to sell them free from encumbrances, the vendor needs to obtain the bank’s permission to do so, as referred to in paragraph 1.1(j). Normally to sell any fixed assets that are subject to a debenture or fixed charge, a deed of release from the bank would be needed. If there is instead only a floating charge over stock, then instead of a deed of release, all that would be needed is a “certificate of non-crystallisation” (to confirm the bank has not turned the floating charge into a fixed charge, e.g. due to some insolvency event or default on the part of the vendor) from the bank. If there is no such charge, then delete paragraph 1.1(j). If the vendor is not a limited company or LLP, then delete paragraph 1.1(l).

Paragraph 2 refers to the other things the vendor needs to do after completion. If you deleted paragraph 1.1(b) because the final transfer documents were not yet available for signing, you could add it back as a sub-paragraph of paragraph 2.1 and precede it with the words: “as soon as possible after Completion, the Vendor delivers to the Purchaser ”. Although paragraph 2.2 has no limit in time, if the vendor puts in place run-off insurance cover, that would effectively bring its obligation to continue to insure (in respect of events that occurred prior to completion) to an end.

Schedule 3 – Accurate details of all of the employees that are transferring to the purchaser with the business should be inserted here by the vendor.