Nicola Draper has invited a number of people to contribute to the Blog on the Draper Hinks website. This contribution is from a solicitor based in a practice in Leicestershire.
A contract of sale will outline how much the purchase price is for the accountancy practice, when it will be paid and by what means. Usually, the purchase price for the fees for sale is agreed in a set of heads of terms and it could be a lump sum on completion but, often, there will be a deferred consideration clause with claw back provisions. These are designed to protect the potential buyer in the event the accountancy practice loses a particular amount of clients within an agreed time period from completion. These need to be carefully negotiated by the seller. The clause should go on to specify the details of any instalments and the dates they will be paid.
It is important to build in a confidentiality clause, as the information the potential buyer of the accountancy practice will come across throughout the course of its due diligence can be of a sensitive nature. It is imperative that the potential buyer (and his employees) do not disclose, or utilise, any information obtained throughout the transaction, other than for the purpose of assessing whether or not to proceed.
The position with employees also needs outlining carefully and specific employment advice will need to be taken so that the seller can be sure they are complying with the TUPE Regulations.
Accountants generally have a large database of clients. The seller of the accountancy practice can include provisions in the contract controlling how the client base is handled after completion. Selling an accountancy practice is very personal and it is important the reputation and goodwill of the business is protected, even after the sale. Both the seller of the accountancy practice and the potential buyer of the accountancy practice may want to build in an agreed handover period, so the transition takes place as smoothly as possible, limiting the disruption for clients.
Limitation on claims
Generally, these types of agreements contain various warranties. Warranties are contractual promises made by the seller of the accountancy practice about the state of the business at the date of completion and any breach of these could give rise to a claim for breach of contract. Limiting the claims reduces the seller’s exposure moving forwards by not leaving the time limit for claims open ended. Limiting the value of the claims also reduces the amount of low value claims, which neither party wants to be concerned with. It is also important that the potential buyer of the accountancy practice is made to mitigate their losses from any breach of contract.
It is imperative that both parties have certainty as to how any disputes will be settled in the future. They need to know what jurisdiction applies and which courts will have the power to determine any disputes.
Draper Hinks does not get involved in the drawing up of contracts nor does it advise on the legal aspects of the buying and selling of accountancy practices. We are happy to recommend a firm of solicitors based in Leicestershire who are specialists in the area of buying and selling accountancy practices. There is so much to be taken into account prior to completing a deal, it is vital to work with someone who understands all the aspects, has recent relevant experience and can talk your language. Draper Hinks have recommended this frim on many occasions because they are good, thorough and knowledgeable.
If you want to have some more information regarding this blog, or any other matter please email Nicola Draper at firstname.lastname@example.org quoting reference Blog 150701