Planning to sell your business but have no clue what and how to go about doing it? Fear not! In today’s article, we will briefly share with you the two ways you can sell your business and a brief guide on what you need to know/ prepare before selling your business.
Make an appointment with Company Secretary for advice and consultation
The common ways to sell your business,
Strictly speaking, it is the ways you can sell, but what you can sell. Below are the two ways to sell a business/ the two things you can sell from your business.
| Two Common Ways To Sell A Business | ||
| Share Sale | Asset Sale | |
| What is sold? | Shares of the company. | Components of the company i.e. assets, debts, and liabilities. |
| Contracting parties | Between the shareholder(s) of the company and any potential buyer(s) (who will become the new shareholder(s) of the company). | Between the company itself and any potential buyers. If it’s a sole proprietor company, the shares will be considered assets if the company is selling its business. |
| What happens before/ after the sale? | The seller is no longer a shareholder of the company. This means that he will no longer be able to participate in the affairs of the company. | A resolution must be passed by the company (with the exception of a sole proprietor company) before the company can dispose of the company’s components. |
The checklist for both methods
| Preliminaries (before buying and selling shares/ assets) | For share sale- are there any contractual obligations/ restrictions/ procedures that need to be observed under the shareholder agreement or the company’s constitution? For asset sale- are there any assets that are needed to be sold asap/ excluded from the asset sale agreement/ Have both parties come to a consensus as to what component of the company is to be sold to the buyer/ retained by the company? For both instances: Have you (and the buyer) notified the necessary professionals (lawyers, company secretaries, accountants, etc.) to assist you on the matter? Have you prepared the necessary preliminary agreements (Memorandum of Understanding, Terms Sheet, Letter of Intent, etc.) that could assist both parties in managing their expectations before entering into the main agreement? Have you conducted due diligence on your company? This would also help in managing the expectation of a potential buyer of the shares/ assets. The seller knows what they are getting and this would also prevent you from being sued by the seller for failing to disclose any adverse information that might affect the seller after the seller has signed the agreement. Have you obtained a valuation report in regard to the value of your company? |
| Signing phase | For both instances: Have you prepared a non-disclosure agreement (NDA) to protect your company’s assets from being siphoned off by the buyer at your company’s expense? Are there conditions precedents to the completion of the transaction i.e. in the event the deal falls through because of certain unforeseen events, is there a gentlemanly agreement between both parties to walk away without incurring any severe repercussions (other than some minor penalties)? For the seller- Can you give a guarantee (or warrant) to the buyer that: Do you have the legal authority to sell the shares/ assets? The information you provide in relation to the shares/ assets you are selling is accurate. For the buyer- Can the buyer give a guarantee (or warrant) to you that he/ she has the legal authority to buy the shares/ assets? |
Selling off your Sdn Bhd business is not a daunting task if you have the right advice. As noted above, seek advice from the relevant professionals- it would undoubtedly ease your progress in this matter.
Make an appointment with Company Secretary for advice and consultation
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