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I am thinking about selling my business. What legal aspects
should I be considering?
Most businesses operate from leasehold premises. The value
of any offer made by a potential buyer will be governed not
only by the turnover and net profit of the business, but also
the terms contained within the lease. In particular, the
unexpired term of the lease will be of the utmost importance
to any buyer before an offer is put on the table. Naturally,
the lower the unexpired term the lower the buyer will be
prepared to offer for the business. However, if the unexpired
term of your lease is minimal, such circumstances should not
always be interpreted as a disadvantage. It is standard for a
lease to require an outgoing tenant to enter into what is
known as an Authorised Guarantee Agreement ("AGA") resulting
in the tenant's liability under the lease only ceasing when
his assignee disposes of the lease. A simple mechanism for
avoiding an AGA would be to negotiate a surrender of the
existing lease with the Landlord on the proviso that a new
commercial lease is granted to a potential buyer. In such a
scenario, the buyer wins as he obtains a fresh lease
comprising a long unexpired term. The Landlord saves marketing
costs and the risk of empty premises. Most importantly the
seller walks away from all obligations under the lease without
having to enter into an AGA.
The above constitutes only one of a multitude of issues
arising in the course of selling a business which ultimately
break or seal a deal. For more information on this subject and
other services KNIGHT POLSON can offer, please contact Tom
Bessant, Commercial Solicitor.
Dated: January 2010
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