Buyers

The essential clauses of the contract of sale of enterprise.

Author:
Saad Benryane

The business sale contract is facing a final stage. A clear, detailed drafting is clearly necessary to prevent any dispute to appear, but above all to preserve the investment of the buyer. To achieve these objectives, the inclusion of the following clauses is inevitable.

Description of the buyer, the seller and the company: The proper identification of the parties is obviously necessary, but it is above all the description of the company and the type of sale that must be detailed painstakingly. Buying a business of a company and the shares of a company differ greatly and the terms of the contract should reflect such a distinction through precise drafting.

Price, method of payment and financing: The buyer and seller have the freedom to agree on the terms of payment. It is above all the presence of a financing or a balance of sale price that must be clearly indicated in the contract. The date of the first and subsequent payments should also appear in writing, along with the terms and conditions.

Representations and warranties of the seller: Under this clause, the seller declares all facts known to the company that he is about to transfer to the buyer in order to certify the state of the company. For example, the seller may make representations about the absence of labour disputes, the quality of the financial statements reported and any other relevant matter. These representations are accompanied by guarantees to certify that the representations of the seller are accurate, otherwise he will be obliged to indemnify the buyer.

Non-competition clause: This protection is introduced for the benefit of the buyer. The salesperson, having spent years building the business, has certainly mastered the field and has probably acquired key business partners. Seeing him sell you his business to start over with such baggage would undermine your investment. Include a non-competition and non-solicitation clause in the sales contract providing for a reasonable time and territory limit.

Compensation commitments: This clause is mainly applicable in a transitional context and is used to compensate for claims by third parties that were not provided for in the contract, such as a tax account or a tax assessment due. The clause will set out the mechanism by which the seller will compensate the buyer and the options available to him to do so. It can also be used to compensate the buyer when an erroneous declaration has been submitted.

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