Can A Seller Get A Clean Break And Sleep Easy?

Q: Can A Seller Get A Clean Break And Sleep Easy?

Asset Sale You will be left with the liabilities, including tax. Additionally there may be warranties that will not expire for say 2-years. Share sale It is easier, in one sense, to achieve a clean break in so much as you will no longer own the company, ie, all assets and liabilities have been transferred. However, if you have agreed to various warranties and liabilities then you will have to wait for the claim periods to expire before finally "sleeping easy". When can I sleep easy as a seller? You can relax once the time period for enforcement of warranties / indemnities has passed. That is assuming that full payment is made on completion and there are no post-completion provisions whereby, for example, the final sale price might depend on how the business performs in the future (eg earn out provisions). In these circumstances, you will not be able to rest easy until full and final payments have been made and, even then, not until the time period for enforcing warranties and indemnities has also passed.

Asset Sale You will be left with the liabilities, including tax. Additionally there may be warranties that will not expire for say 2-years.

Share sale It is easier, in one sense, to achieve a clean break in so much as you will no longer own the company, ie, all assets and liabilities have been transferred. However, if you have agreed to various warranties and liabilities then you will have to wait for the claim periods to expire before finally “sleeping easy”.

When can I sleep easy as a seller?

You can relax once the time period for enforcement of warranties / indemnities has passed. That is assuming that full payment is made on completion and there are no post-completion provisions whereby, for example, the final sale price might depend on how the business performs in the future (eg earn out provisions). In these circumstances, you will not be able to rest easy until full and final payments have been made and, even then, not until the time period for enforcing warranties and indemnities has also passed.

About the Author: Martin Truman

Solicitor and Managing Director at Truelegal Solicitors: Martin has spent 25+ years advising entrepreneurs and business owners. With over 3,100 small and mid-size business sale and purchase transactions completed under his watch, he is confident that Truelegal has the toolkit to deal with most issues that buyers and sellers of UK businesses encounter. Realising the full value of a business for its owner on exit is his passion.