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Are your contracts in order?

If your company is up for sale, a serious buyer will carry out a detailed due diligence exercise, gathering as much information as possible to help them decide if they should proceed, at what price and on what terms. One area which invariably undergoes detailed scrutiny is the company’s commercial contracts, in particular contracts with customers.

Key areas which will be subject to review by the buyer and their legal team include:

  • Change of control/non-assignment – are customers able to terminate their contract upon the sale of the company?
  • Price increases – for any long term supply agreements, will the company be able to increase prices to ensure that they remain commercially viable?
  • Standards of service – how onerous are obligations and any monetary remedies in the event of a failure in service?
  • Confidentiality – has all confidential information relating to the business been properly protected?
  • Intellectual property – is any intellectual property properly protected?
  • Title to goods – if you are selling goods, can you legally retain ownership of the goods prior to them being sold onwards under a “retention of title” arrangement?
  • Liability – is the company’s liability for breach of contract/negligence excluded or limited insofar as the law permits?

A significant level of value is locked up in a company’s commercial contracts and any defects could result in the buyer seeking a reduction in price or even withdrawing from the deal altogether. By ensuring your contracts are in order, you maximise the chances of selling your company at the best possible price.For advice on this or any other aspect of corporate or commercial law, contact Tony Morris on 01625 531676 or email tony.morris@chlsolicitors.co.uk

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