The Contract
Of
Purchase and Sale of
a Liquor Licensed Business.
www.liquorlicensing.co.za
The contract for the purchase and sale of a business can
save expensive litigation in future. It can also eliminate misunderstandings
and conflict between the buyer and the seller.
The Sales Agreement of a business must be drawn up by a
competent person who has the knowledge and experience in Business Broking.
The three basic Sales
Agreements for businesses are:
-Offer to Purchase – for Sole Proprietors.
-Offer to Purchase the Shares and Loan Account – for
Companies.
-Offer to Purchase the Member`s Interest and Loan Account –
for Close Corporations.
These are specialized contracts, and each contract is unique
to its circumstances. Unless advised by the purchasers Accountant, do not take
an uncalculated risk, and take over the Member`s Interest and Loan Account of
the seller`s Close Corporation.
V. A. T. on the
purchase of a business.
The Sale can be structured in such a way that it does not
attract V. A. T. on the purchase price. Always deal with competent Business
Brokers and Accountants who will assist the buyer and seller in dealing with
such matters and in terms of the law.
Stock included in the
purchase price.
When stock is included in the purchase price the buyer must
take care. The Sales Agreement must clearly state if the stock is calculated
at:
- The rand value of the stock calculated at cost price. (Invoices
can be proof of the cost price)
- Is the stock value including or excluding V. A. T. (check
invoices)
All damaged and expired stock must be excluded.
The buyer must realize that that the stock at the effective
date (hand over date) may not be fast moving stock. The buyer must therefore
provide for the purchase of additional stock.
Advertise the sale in
terms of Section 34(1) of the Insolvency Act No. 24 of 1936.
On the Sale of the business it is advisable to publish a
notice in terms of Section 34 of the insolvency act so that by the effective
date (hand over date), a period of 30 (thirty) to 60 (sixty) days will have
elapsed since the publication. Without such notice creditors with valid claims
can influence the transaction and lodge a claim.
Liquor License.
- Make sure the Liquor
License is on the name of the seller before concluding the deal. (A liquor
license cannot only be held by the building)
- Make sure that the liquor
license of the business you want to buy is valid and renewed by the
seller.
- Insist on an original
Liquor License certificate, last year’s renewal advice from the Liquor
Board.
- Proof of payment of the
renewal of the Liquor License.
- Make the above a condition
precedent in your sales agreement (that means that if these conditions
have not been fulfilled, a contract has not been concluded. Specifically
specify that if the conditions precedent are not fulfilled the seller must
place you in a position as if no contract was signed.
A specialist in the field of the applicable license must be
consulted prior to signing the Sales Agreement. The consultant can make sure
the license is valid and that it can be transferred to the buyer. We are Liquor
License Consultants and Business Brokers and can assist the buyer and seller in
the process of the transfer of a liquor license.
Restraint of trade.
A restraint of trade that is reasonable must be imposed upon
the seller to prevent the seller from opening a similar business and unfairly
compete with the sold business.
Employees of the
Business.
Take note of the
Labour relations act which deals with the transfer of employee`s employment
contracts from the seller to the buyer. Make use of specialists in the field of
labour relations to avoid possible litigation.
Supplier`s and
customer`s lists.
The seller must hand over a list of suppliers and customers
to the buyer on the effective date.
Asset list.
A list of assets and equipment must form part of the Sales
Agreement.
Debts and Liabilities
of the business.
Great care must be taken that the buyer does not buy the
sellers debts and liabilities. Your competent Business Broker and accountant
will assist you in this regard.
Debtors and Creditors.
The decision on the debtors and creditors must be stipulated
in the Sales Agreement.
Finally.
Invest in utilizing specialists in your business. Remember
the most dangerous person is one who does not know that he does not know.
You may phone us for free advice on the purchase of your
licensed business.
Frik Liebenberg
Frik Liebenberg Business Advisory
Services cc 99/05522/23
082 556 8368
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