Preparing for a Share Sale: Company Health Check
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 […]

Preparing for a Share Sale: Company Health Check

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
- Assets
- Property
- IT and Intellectual Property
- Litigation/disputes
- Insurance
- Health & Safety/Regulatory
- Compliance and Consents
- Environmental
- Pensions
- 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 commercial@mlplaw.co.uk or calling 0161 926 9969.