Be prepared for the Schedules your team will need to produce at time of company sale
Ask most owners/CEO’s what legal documents will be needed to sell their company and you’ll most often hear reference to the Purchase Agreement (also called Definitive Agreement, Sale & Purchase Agreement or even Equity/Asset Purchase Agreement). This legal document is the main one that will be negotiated between buyer and seller. But what often surprises Sellers is the litany of documents that will be needed to consummate a typical acquisition.
Here is a general listing of just some of the additional documents your lawyer and team will be preparing. The absence of any one of these could delay or put a transaction in jeopardy:
- Environmental schedules explaining all matters related to ground water, air or chemical handling activities at your company
- Financials schedule that explains your company accounting practices – how you recognize revenue, how you track inventory, etc
- Employee schedule that list names of employees, tenure, role, compensation levels
- Employee schedule related to legal matters such as prior or current labor dispute or lawsuits and current status of each
- Employee schedule associated with any bonus or profit sharing plan your company might have in place and how this plan will be addressed post transaction
- Asset schedule that lists all assets being sold with the company and any being excluded
- Liability schedule that identifies any current or long-term liabilities your company has that need to be addressed prior to or on the day of transaction closing – there will also be a schedule related to known liabilities that the acquirer might have to deal with post transaction and how this will be handled (i.e.: employee litigation matters or customer warranty issues)
- Intellectual Property schedule that shows a listing of the IP your company owns and proof of ownership (i.e.: web domains, tradenames, trademarks, trade secrets, patents)
- Permit and Certification Schedule that lists all permits and certifications your company possesses and the maturity/renewal/costs related with each
- Software License Schedule that reflects all the third-party software your company uses and proof of current licensing
- Material Contracts Schedule which will list all meaningful customer or vendor contracts that your company is a party to
- Warranty Schedule showing past and current product warranty matters your company has and is currently dealing with
- Customer Schedule reflecting the major and possibly all your company customers
- Insurance Policy Schedule listing all insurance policies owned by the company and their maturity, renewal, costs associated with each
There will be other schedules as those required are unique to each deal. But in addition to your company needing to be ready to prepare these Schedules, you will also be signing documents relatd to resigning your role from the company if you’re not remaining or if you are, an employment agreement must be negotiated. And you and other key members of your team might be signing non-compete agreements.
Selling a company naturally brings stressors. But eliminate the more obvious stressors by understanding all the various documents you will be generating and negotiating to consummate a deal. Give us a call or talk with your lawyer to see samples of what you’ll want to be prepared for and help your future deal go more smoothly.
