Sale of Business Agreement Template - With Employees - South Africa

Sale of Business Agreement Template - With Employees - South Africa

Summary A Sale of Business Agreement can be used when a person or entity sells portion or the whole of their business to a buyer, without selling the shares or members interest in the entity. The terms of this contract provide for the staff to be transferred together with the handover of the business.

Why do I need a Sale of Business Contract? A contract that governs the Sale of a Business sets out critical terms of the purchase, including the purchase price, the payment terms, a clarification of the components of the business that are to be included in the sale, and the identification of the staff that are being transferred. A business owner who intends to sell their business, whether it's a division of the organisation, a specific product-line, a department, or the entire business operation should use a written contract to give effect to the sale.

This agreement envisages the transfer of employees to the new business owner. If the sale of the business does not include staff then the Sale of Business Agreement – No Employees can be used.

Please note that this contract does not provide for the transfer of shares in a company, or members interest in a close corporation. In these instances a Sale of Shares Agreement or a Sale of Members Interest Agreement should be used.

What is included in the template Sale of Business Agreement with Employees? The standard terms of this contract consist of: parties; interpretation; sale of business; warranties; purchase price; valuation of stock; liabilities; debtors; staff; Insolvency Act publication; cession and assignment; delivery; risk; resolution; breach clause; general; annexures.

How long is the Sale of Business Agreement with Employees? This template can be printed onto eleven pages.

What is required to use this template Sale of Business Contract?

• Read the contract thoroughly to make sure that it meets your needs. The template contract is editable, so you can adjust it to your requirements.
• Complete the pertinent details: fill in the names of the Seller and Purchaser, detail the business being sold, add in the agreed purchase price, specify when the purchase price is to be paid.
• Once both buyer and seller of the business are satisfied with the terms then they can sign the agreement. Each party should get a copy of the final contract. It is also recommended that the signed agreement is scanned and stored electronically.

You may also be interested in: Confidentiality Agreements. It's particularly useful to have an NDA signed before negotiations commence and sensitive information is revealed.

 Why do I need a Sale of business agreement- with employees?

A sale of business agreement, also known as a Business purchase agreement or business sale agreement, is a legal document that outlines the terms and conditions upon which both parties agree for the sale of a business from one party to another.

This can be oral or written agreements, however written agreements tend to provide more protection in the case of a legal suits brought by either party.

• When employees are included in the sale, the business sale agreement must be drafted to address the rights and obligations of the buyer and seller. However in such sale of business agreements employees rights and obligations must be considered therein as well as any other particulars upon which both parties agree such as the closing date for the business sale agreement.
• Benefits of including existing employees in the sale of business agreement or business sale agreement include ensuring that their employment is protected and that they have a clear understanding of their role and responsibilities under new ownership and will be to the sole benefit of the new owner and their newly acquired employees.
• The business sale agreement also sets out the total purchase price inclusive of the business assets, including any assets related to employees, such as accounts receivable, sales documents and anything relating to such documents, customer lists, employees sale history and record in the event of, for example, an insurance company and also outlines any assumed liabilities under the business sale agreement.
• The sale of business agreement with employees included in the sale typically includes a business purchase agreement, which sets out the terms and conditions of the purchase price, property insurance, and transfer of the business assets.
• The business sale agreement may also include a business lease agreement within the business sale or business purchase agreement, if applicable, and a sublease agreement if the property is being leased.
• Some general aspects covered within the Business purchase agreement template are things such as an assessment of fair market value, the agreement date, seller address, any intellectual property rights, seller's representations made to the buyer/ paying party, buyer address, any fees incurred or costs incurred and any other fees that may be applicable, the purchase property insurance, business plan, any third party agreement that needs to be obtained in order for the business contract/ business purchase agreement to go ahead, property related clauses, the purchase price upon which both parties agree, closing date, whether any third party beneficiary is to be included in the agreement of sale/ business sale agreement.
• Other key elements of the business purchase agreement template include the closing date, conditions precedent, applicable law, dispute resolution, any prior written approval required for the business sale and the parties involved in the business sale under the business purchase agreement.
• The parties acknowledge that both the seller and the buyer are seeking legal resolutions in case of any dispute pertaining to the business sale and will include legal manners which are in-line with governing law to resolve any such disagreements in a timely manner should they arise from parts of and/or the entire agreement.
• The sale of business agreement ( also known as a business purchase agreement) with employees included in the sale should also specify, the closing date, the fair market value of the business's assets, as well as any excluded assets. Both parties agree to maintain property insurance and purchase such insurance for third-party beneficiaries.
• Business purchase agreement also outlines the fees involved and who is responsible for paying them.
• In the event of any disagreements arising from the business purchase agreement, the parties agree to mediation prior to seeking legal resolution. The seller agrees to make certain representations and warranties about the business or business purchases, and the buyer agrees to be solely responsible for the business's operation after the sale. If party fails to adhere to the aforementioned they will be seen as having breached the terms of the entire agreement.
• If the buyer fails to sign the business sale agreement in a timely fashion and supply the signed business sale agreement to the seller, i.e. prior to the closing date, thus indicating an acceptance of all clauses in the agreement, for example the purchase price, then the offer will lapse.
• A seller and Purchaser may both specify any conditions precedent to the business sale agreement (business purchase agreement) being in full effect, such as any surety or assurances the parties obtained in order for the business sale to go ahead.

Overall, a sale of business agreement/ business sale with employees included in the business sale is a written instrument executed in written form that provides a clear understanding of the rights and obligations of all parties involved in the business sale, including former employees. It can be used to prevent disputes, clarify the closing date for the business sale agreement, clarify the purchase price, clarify expectations, and ensure a smooth transfer of ownership.

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