Preparing for a Share Sale: Company Health Check
- Corporate Law
- 13th Feb 2020
The sale of a company can be a long and complex process and one of the most time consuming aspects for a seller is the due diligence process. It is becoming more common that, before actively engaging with a buyer, the seller wants to undertake an internal due diligence review. The seller’s legal advisers can […]
By Rachel OwenMLP Law
The sale of a company can be a long and complex process and one of the most time consuming aspects for a seller is the due diligence process. It is becoming more common that, before actively engaging with a buyer, the seller wants to undertake an internal due diligence review.
The seller’s legal advisers can play an important part in this process and their role will include:
- Providing the seller with a legal due diligence information request, containing the type of questions that a buyer is likely to ask about the company, so the seller can prepare responses and start collating all the related documents
- Collecting all the due diligence responses and documents and uploading these to a virtual data room
- Reviewing the responses and documents provided to identify any material issues
- Advising the seller about possible methods to rectify or limit the extent of any issues
- If required by the seller, preparing a legal due diligence report
The type of information that a buyer will usually request about the target company and which the seller should prepare for includes:
- The corporate structure and shareholdings
- Constitutional documents and any shareholders’ agreements
- Financial reports and accounts
- Employee details and terms
- Material contracts/commercial arrangements
- Finance/borrowing/banking arrangements
- IT and Intellectual Property
- Health & Safety/Regulatory
- Compliance and Consents
- Any industry specific enquiries
The benefits of a seller undertaking a pre-sale company health check or due diligence review include:
- Limiting the time required on due diligence during the sale process, so the seller still has time to get on with running their business
- Identifying in advance any potential issues, areas of risk and/or areas to improve
- Dealing with any issues identified before the sale
- Clarify whether any consents or approvals are required for the sale
- Assist in the preparation of any sale materials to be provided to potential buyers
- The information is all properly collated in a virtual data room to which the buyer and its legal team can have access once a Confidentiality Agreement has been signed and terms agreed
- Assist in the preparation of the seller’s disclosure letter
For a more in depth look at this subject please see our previous blog: To Sell or Not to Sell: Considerations for Business Owners.
For help and advice, please speak to our Corporate and Commercial team by emailing email@example.com or calling 0161 926 9969.
About the expert
Stephen is the Owner of MLP Law and leads our Commercial, IP and Dispute Resolution teams which provide advice on all aspects of the law relating to mergers, acquisitions, financing, re-structuring, complex commercial contracts, standard trading terms, share options, shareholder and partnership agreements, commercial dispute resolution, joint venture and partnering arrangements, IT and Technology law, Intellectual Property, EU and competition law, Brexit and GDPR.
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