If you are thinking of selling your business, it is highly recommended to go through a due diligence checklist before you engage with a potential buyer. A checklist ensures vendors are aware of the information they will need to provide potential buyers, which will then assist in the sale running as smoothly as possible.  

We have created a due diligence checklist below to assist vendors. This checklist is not an exhaustive list and there may be specific information you need to obtain that is relevant to your business and/or the industry.

Finances

• You should provide the buyer with all of the business’s financial records including accounting records, financial statements and the directors’ statements and reports. This information should be up to date and accurate.
• If the financial information contains false or misleading information, it is possible the buyer could rely on that information to buy the business and as a result you could be held liable.  

Debts and Security Interests

• Buyers will also want to receive information regarding any debts or security interests that are owed by the business (if they are to remain in place at settlement). It is recommended to search the Personal Property and Securities Register to determine whether there are any registered security interests against the business. If there are security interests over the business’s property, you will then need to ensure that you can satisfy the debt, or get them removed on settlement.

Key Contracts

• Buyers will also want copies of all the contracts that are integral to the running of the business. This allows the buyer to review the terms of the contract and to see whether the contracts are assignable.

Employment Issues

• It is important the buyer is given all the employment agreements and employee records of their entitlements. This information assists the buyer in determining which employee(s) to keep and what the ongoing employee obligations are.

Lease Agreements

• Leases can be integral to your business, so buyers will want to obtain a copy of any lease agreements so they can review the terms and ensure the lease is assignable.  To assist, you can advise your Landlord of the sale and that the lease is likely to be assigned.

Intellectual Property

• As your brand, logo and/or other intellectual property is important to your business, it is recommended to ensure that all intellectual property which is connected to this business is identified and properly protected.
• If you find you have not registered your intellectual property, it is recommended to do so as buyers are less likely to purchase the business if there is no ownership in the intellectual property.

This checklist provides potential buyers with some relevant information they need to assist them when deciding whether to purchase the business. This is not an exhaustive list so if you are thinking of selling your business we can assist you by providing you with advice to ensure you have all obtained all the relevant information for buyers.  

Leading law firms committed to helping clients cost-effectively will have a range of fixed-priced Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Claire Tyler
Commercial and Business Lawyer
Wellington, New Zealand