Completion Checklist and Conditions Precedent
Many business owners assume that the signing of the sale agreement is the final step in the process. However, this is not always the case.
Many offers for the business — in the form of the term sheet or within the Business Sale Agreement — detail that the deal is subject to the satisfaction of both Conditions Precedent and the Completion Checklist.
This article will explore the risks that may lead to a failed sale, and offer suggestions on how to overcome these potential risks.
If you're ready to sell your business, and want to protect against your sale falling through at the last minute, get in touch with Nash Advisory. Our expert team can guide you through the process, and ensure that your business gets the best result.
[feature_link]Nash Advisory is here to help you understand the many reasons why a business sale might fail.[/feature_link]
Conditions Precedent
By definition, a condition precedent is a legal term describing a contractual condition that is required before something else can occur. In the context of a business sale, the conditions precedent are all of the items that are required to occur prior to the confirmation of the sale.
To name just a few, common conditions precedents include:
- Third party consents, such as transferring of licences from the selling entity to the buying entity
- Regulatory approval
- Legal opinions
- Competition clearance
- Material change in the business’s performance
The non-occurrence of these events can be excused, however only at the discretion of the buyer. Clear, concise, and strict conditions precedents must be agreed upon from the outset to ensure a clean exit.
Nash Advisory's expert team can help you navigate the ins and outs of conditions precedents. Get in touch with us to discover how you can protect your business sale from failing because of a conditions precedent.
Completion checklist
A completion checklist is commonly used to detail all of the steps required through each of the final stages of the transaction to reach completion.
These are commonly split into three stages — pre-completion, on completion, and post completion. Each stage will detail events that need to occur, documents that need to be provided, signed or delivered, and dates for each provided in the context of the overall sale process and relative to all other events.
1. Pre-Completion
The pre-completion stage usually involves a checklist of tasks to be completed by certain individuals or teams, and an attached timeframe. Documents will need to be prepared throughout this stage, including deeds of consent and deeds of assignment.
2. On Completion
Completion day marks the end of months of hard work on both sides of table. This day usually involves a face-to-face meeting where all original signed transfers and documents are exchanged. Here, the buyer will ensure that they have everything needed for the sale, and a seller will be given a cheque for the purchase price.
3. Post-Completion
There are still steps to be finalised. For instance, councils and utilities providers must be aware of changes to ownership and ASIC must be informed of director and shareholder changes.
Finally, sellers and buyers need to ensure that all stamp duty is paid on documents, if necessary. In regards to ongoing obligations under the sale agreement, compliance must be closely monitored.
The business sale is only complete when each step of the completion checklist has been executed or excused by the buyer, and when each of the Conditions Precedent have been satisfied. The final transfer of funds can then take place for the sale of the business.
Contact Nash
If you’re considering selling your business, you should ensure that the entire deal is managed by experts with previous experience in completing transactions.
Outsourcing these skills ensures that all of the hard work you put into receiving offers for the business is not wasted. Businesses for sale need to satisfy all of the requirements of the Conditions Precedent or Completion Checklist.
