The Process Of Selling A Brokerage

Author:Mr Keith Smyth
Profession:Dillon Eustace
 
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Introduction

A business owner needs to be aware that the sale of a business

is a complex process. It is a process that requires detailed,

advanced planning and careful, ongoing management. Very often,

sellers believe that their work in selling the business is

essentially complete when the broad strokes of a deal have been

hammered out with a potential buyer. All too often, sellers become

frustrated with the time it subsequently takes to complete the sale

simply because they were never advised of the extent and complexity

of the sale process nor the number of issues that will have to be

addressed and decided upon. What should a broker expect, therefore,

when he sets out to sell his business?

A Sale of Company Shares

Brokerages in Ireland invariably take the form of limited

liability companies having a share capital. The assets of the

business - the employees, the property interests, the client base,

the goodwill, the contracts with life offices and appointments from

lenders, etc. - are all held by the company. If a broker intends to

sell his broking business, it is the company's shares rather

than the company's assets that are sold.

The principle of caveat emptor – let the

buyer beware – is an underlying principle in the buying

and selling of company shares. This is because, unlike in many

other areas of law, Irish statute law does not impose itself upon,

or imply any safeguarding or limiting terms into a share sale

agreement. In the absence of agreement between the seller and

purchaser to the contrary, therefore, the purchaser alone will

(save in very limited circumstances outside the parameters of this

article) be entirely responsible for the past and future

liabilities of the company and the seller will have divested

himself entirely of all responsibilities to the company. Because of

this, the purchaser of a company will invariably attempt to agree

that the burden of the liabilities of the company shifts to a

greater extent back on to the seller. The seller will obviously

resist any such attempts. It is the negotiation of the extent of

the parties' respective responsibilities to and for the company

that most often gives rise to delays in the sale of companies.

Before attempting to negotiate the extent of his

responsibilities for the affairs and liabilities of a company the

purchaser will want to carry out an investigation into what those

liabilities and responsibilities are. The investigatory process is

called due diligence.

Due Diligence

The due diligence process involves a detailed investigation...

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