Selling a business requires careful planning. Whether you’re retiring, or are a serial entrepreneur ready for your next venture, preparing a business for its sale is an essential first step, far before you find a buyer.Â
In today’s blog post, we will cover the key steps to help you prepare for your business’s sale.
Let’s jump right in.Â
Organizing Corporate Records
One of the first steps is to ensure your corporate records are up to date. (Read more about a corporation’s annual obligations). In certain cases, it might be necessary to draft resolutions bringing the corporation up to date, particularly where key decisions were not reduced in writing. This is also the opportunity to review the articles of incorporation, by-laws, and other corporate records such as the securities register, to ensure that any transactions or changes made in the company throughout the years are accurately reflected.Â
This is critical for demonstrating the legitimacy and stability of the business to potential buyers. These records provide insight into the company's history, structure, and compliance with regulatory requirements.Â
Identifying and Resolving Legal Issues
Perhaps you are renting a commercial space and are disagreeing with your landlord about the rent increase. Maybe you are having a dispute with a vendor. These are examples of potential legal issues, which can significantly impact the sale process.Â
In this step, identify any potential pain points in the business and address those before proceeding with a sale. This will minimize disruptions and increase the likelihood of a successful sale transaction. Additionally, potential buyers would identify these as red flags, either withdrawing if they are not willing to risk litigation or using it to negotiate the acquisition price.Â
Reviewing Contracts and Agreements
The third task is carefully reading through every contract and agreement in place, from your commercial lease to vendor agreements. Through this review, identify any obligations or restrictions that may affect the sale of the business. In particular, look for change of control clauses which require consent from co-contractors, or specific actions to be taken before the business can be sold. Understanding these contractual provisions will help avoid issues in the sale process and prevent potential complications.Â
Assessing Intellectual Property Rights
A company’s intellectual property is often its most valuable asset. Whether you own copyright, trademark and/or patents conduct an IP audit of your intangible assets and review compliance with registration requirements. The purpose of this step is to identify the IP owned by the business and review its registration, validity and enforceability. This audit will also allow you to assess any potential risks of infringement or challenges to your IP rights, which could impact the sale value or attractiveness of the business to potential buyers.
Conclusion
Preparing your business for sale in Quebec demands careful attention to legal considerations at every stage. From organizing corporate records to resolving legal issues, reviewing contracts, and assessing intellectual property rights, each task is pivotal for ensuring a smooth and successful transaction.
By proactively addressing these legal aspects before listing your business, you can mitigate risks, and maximize value. Engaging experienced legal advisors early on provides invaluable guidance.
Thorough preparation is key to achieving your desired outcome, whether you're a seasoned entrepreneur seeking new ventures or a retiring owner passing on your legacy. Invest in preparing your business for sale today to reap significant rewards.