Due diligence in purchasing business
The concept of buying a business is to buy a business, not a company to buy the business. The purchase of a business is the transfer of the business-related assets between the buyer and the seller. The buyer is independent of the liabilities incurred by the seller in the operation of the business. The due diligence of the due diligence includes surveys at the law level, the financial level, the market level, the technical level, the government policy, and the planning level. Detailed due diligence will help buyers avoid loss and law responsibility. The due diligence at the law level is mainly introduced from the following six aspects. First, conduct due diligence on the seller. Investigate the ownership of the business. The buyer needs to check whether the business name is registered in the corresponding company or individual. Only the company or a person has the right to sell the business. Investigate the background of the seller, the company or the individual. For example, whether there is an insolvency record, a crime record, a court enforcement order, and the like. As with the purchase of business and other goods, the buyer needs to prove that he is a real buyer, has done a survey of the seller, and is not deliberately buying it knowing that the seller has a problem. Second, an investigation of the assets to be purchased is carried out. Investigate whether the seller holds all the assets of the business. Whether each asset is a mortgage, a lease or a buy-off. Whether the transfer of intellectual property (e.g., trade mark, patent) is involved. To judge the legality and value of the intellectual property. An investigation of the business's licence (e.g., a wine card). Investigation of whether the relevant regulations allow the business to be legally transferred. In the contract, it is the premise of ensuring that the license can be legally transferred to the end of the business transaction. The quality and quantity of the existing goods to be transferred are checked. The buyer and the seller need to clearly not follow the assets sold by the business. For example, advances, accounts receivable, and the like. If both buyers and sellers are entities registered with GST, the seller is not required to impose GST on the buyer, that is, the contract price does not contain GST, and the buyer will not be required to hedge the GST with the IRS in the future. The lease contract of the equipment shall be considered in consideration of the lease of the place of business involved in the business contract for business. Whether the lease requires a renewal and when to renew the lease, the rent after the lease is increased by the year's growth index or needs to be re-evaluated in line with the market situation. The term of validity of the relevant insurance shall be taken into account and the object and scope of the insurance shall be protected. Taking public liability insurance as an example, if a consumer slips and injured in the business's place of business, depending on the way and the object of the injured, the insurance content of the business site becomes critical.9. If the transfer of immovable property, such as land and property, is involved, it is necessary to conduct a property right inspection of the real property. It is recognized that the seller has the right to sell the real property and may have no barrier to transfer the title. Third, the transfer of the related contract is for the contract signed by the seller and others in this business, and the buyer should first consider whether there are other alternative contracts to achieve the same effect; and then consider the conversion of the seller's old contract to the buyer's name, At the same time, consider whether the seller has the liability for breach of contract in the old contract, any unfair provision in the contract, and whether the relationship between the other party of the contract and the seller will be in the interest of the buyer. The fourth, financial responsibility, and the contract that promises to buy a business are clearly defined as the responsibility and commitment that the seller asks the buyer to continue to take, and which are not to be sustained by the buyer. For example, whether the buyer is required to guarantee the quality of the sold goods, whether the buyer is required to continue to perform the return refund agreement of the sold goods, whether the buyer is required to honor the interests of the relevant members, and the like. Fifth, employment relationship 1. Control the key. In the business of the business, the main manager is who. If the manager has a decisive role in the success of the business, then the manager should sign the employment agreement to protect the buyer's interests. Review the employment contract. Investigate whether the employment contract is in line with the requirements of the employment law, and whether there is or may be a related complaint to the Seller. Investigate the employee's work permit. Investigate whether the employee has a valid visa or a related license necessary for the position. Sixth, the survey of government policy 1. A survey of the local health environment, water source standards, and waste disposal policies. The investigation of whether or not new law is in place in the government may have a negative impact on the business. For example, the legalization of Uber may lead to an impact on the taxi business, or the government's increase in tariffs on some of the raw materials has led to an increase in the cost of the business. The investigation of whether the government will make a regional division, as well as future roads and infrastructure, will have a negative impact on the business being purchased. Consult local city planners as necessary. The above is the most basic survey to be made at the law level for the purchase of a business. These surveys will increase or decrease depending on the industry's differences and the complexity of the situation. A rigorous due diligence before the purchase of a business is the cornerstone of the security of investment. end
Wang Gang, lawer, Herald Legal, law Consulting vx: heraldlegal3 for Chinese in Australia