When it comes to buying or selling a business in New Zealand, one of the most critical documents involved is the Sales and Purchase Agreement (SPA). This legal document outlines the terms and conditions of the sale and purchase of a business, and it is essential to ensure that it is well-drafted and executed to avoid potential disputes down the line.
The SPA is typically prepared by the vendor`s lawyer and reviewed by the purchaser`s lawyer before the parties sign it. Some of the critical components of the SPA include:
1. The purchase price: This is the amount that the purchaser agrees to pay the vendor for the business. It may be a lump sum or be paid in installments.
2. Assets or shares: The SPA must clearly specify whether the transaction involves the purchase of assets or shares of the business. If it`s an asset purchase, the parties must agree on which assets will be sold, and they must be described in detail. If it`s a share purchase, the parties must agree on the number of shares to be sold and the price per share.
3. Warranties and representations: These are statements made by the vendor about the business, such as its financial position, assets, liabilities, and legal status. The SPA should specify the extent of these warranties and representations and the consequences if they are found to be untrue.
4. Conditions precedent: These are events or conditions that must be satisfied before the parties can complete the transaction. Examples of conditions precedent include obtaining necessary consents, approvals, or permits.
5. Restrictive covenants: These are provisions that limit the vendor`s ability to compete with the business after the sale. They may include non-compete clauses, non-solicitation clauses, or confidentiality clauses.
6. Indemnities: These are provisions that require one party to compensate the other party for any losses or damages resulting from a breach of the SPA.
7. Dispute resolution: The SPA should include a mechanism for resolving disputes between the parties. This may involve arbitration or mediation.
It is essential to work with a lawyer experienced in business sales and purchases to ensure that the SPA is well-drafted and executed. By doing so, you can protect your interests and avoid potential legal disputes down the line.