Business sale agreement template

Selling a business is a high-risk, high-reward situation, so a well-structured agreement is essential to protect both parties involved. 

This article will delve into the intricacies of a business sale agreement, its purpose, and how it can be managed effectively. We'll also discuss the challenges of handling these contracts and how automating them with Juro can streamline the process.

What is a business sale agreement?

A business sale agreement is a legal document that outlines the terms and conditions of the sale of a business. This contract ensures that both the buyer and the seller are clear on what is being sold, for how much and under what conditions. It details the assets included in the sale, the purchase price and the obligations of each party.

What is the purpose of a business sale agreement?

The primary purpose of a business sale agreement is to ensure a smooth transaction between the buyer and the seller. It achieves this by:

• Defining the terms of the sale. A business sale agreement lays out the specific details of what is being sold, including tangible and intangible assets.
• Providing legal protection. The agreement helps protect both parties from potential disputes by clearly outlining their rights and obligations under the contract.
• Ensuring compliance. A well-drafted business sale agreement ensures that the sale complies with relevant laws and regulations.
• Facilitating financing. If the buyer is seeking financing, a business sale agreement is often required by lenders to secure the loan.

Who manages business sale agreements?

Business sale agreements are typically managed by several key stakeholders, each playing a crucial role in the process and making sure that parties’ wishes are accurately represented.

• The owners or shareholders of the business being sold are directly involved, making the final decisions and signing off on the agreement. In some cases, business brokers facilitate the sale – helping to find potential buyers, negotiate terms and manage the overall sale process.
• Lawyers or legal advisors specializing in mergers and acquisitions (M&A) are essential. They draft, review and negotiate the terms of the agreement to ensure legal compliance and protect the interests of their clients. 
• Accountants and financial advisors perform due diligence, assess the financial health of the business and ensure that the financial aspects of the sale are accurately represented and fair.
• For larger businesses, executives such as the CEO, CFO or other senior management may be involved to provide insights and ensure the transaction aligns with the company's strategic goals.
• The purchasing party and their legal and financial advisors are also involved in reviewing and negotiating the agreement to ensure it meets their needs and expectations.

Together, these stakeholders work collaboratively to ensure that the business sale agreement is comprehensive, fair and legally sound.

Business sale agreement use cases

A business sale agreement will be used in several key scenarios where the ownership of a business is being transferred from one party to another, primarily in the following situations:

Complete sale of a business

When the entire business, including its assets, liabilities and operations, is sold to another party. This could be a merger or acquisition where a company buys out another.

Partial sale of a business

When only a part of the business – such as a specific division, product line or a set of assets – is being sold. This is common in larger corporations looking to streamline operations or divest non-core segments.

Change in ownership structure

When the ownership structure changes significantly, such as in the sale of a majority or minority stake in the business to new partners or investors. This can also apply to buyouts where current owners are selling their shares to other existing partners or external parties.

Succession planning

When a business owner is planning to retire or exit the business, a business sale agreement is used to transfer ownership to a successor, whether this is a family member, employee or external buyer.

Strategic realignment

When a company decides to pivot its business strategy, it may sell off certain assets or divisions to focus on core activities. A business sale agreement formalizes this process.

Distressed sales

When a business is sold due to financial distress or insolvency. The sale may be part of a restructuring process, where assets are sold to pay off creditors.

What should a business sale agreement template include?

A business sale agreement template should include the following key components:

Details of the parties: names and details of the seller and buyer, along with the date of the agreement.

Description of the business and assets: information about the business being sold, including its name, address, and what it does; and a list of all assets being transferred (equipment, inventory, intellectual property, customer lists, real estate) and any excluded assets.

Purchase price and payment terms: total purchase price, how and when it will be paid (lump sum, instalments), and deposit amount, if any.

Assumption of liabilities and conditions: list of liabilities (debts, leases, contracts) the buyer will take on and those the seller keeps; and any conditions that must be met before the sale (e.g., approvals, financing).

Promises and obligations: seller’s promises about the business (ownership, financial statements, legal compliance), buyer’s promises – if applicable, and what both parties must do before closing (e.g., seller promises to run the business as usual).

Indemnification and confidentiality: agreement on how both parties will handle breaches or undisclosed liabilities, and a promise to keep certain information confidential.

Non-compete clause and closing details: limits on the seller’s ability to start a competing business after the sale, if applicable, along with date and place of closing and actions to be taken at closing (asset transfer, payment).

Governing law and dispute resolution: which laws apply to the agreement and how disputes will be resolved (e.g., mediation, arbitration).

Signatures: signatures of both parties and the date of signing.

Including these components ensures that the business sale agreement is clear and covers all necessary aspects of the transaction, providing protection for both parties.

How are business sale agreement templates usually managed?

Business sale agreement templates are typically managed through a series of steps to ensure they are comprehensive, legally sound and tailored to the specific transaction. Here's how they are usually managed:

First, a legal professional, often a mergers and acquisitions (M&A) lawyer, prepares the initial draft of the template. The template is then customized to reflect the specifics of the transaction, including details about the business, assets, purchase price, payment terms and any unique conditions or clauses.

Next, the initial draft is reviewed by the seller and buyer, and their respective legal and financial advisors. Based on feedback, revisions are made to address any concerns or required changes. This may involve several rounds of revisions and negotiations to ensure both parties are satisfied.

Both parties then conduct due diligence to verify the details of the business, including financial statements, liabilities, assets, and legal compliance. Findings from due diligence may necessitate further adjustments to the agreement.

Once all terms are accurately reflected and both parties' interests are protected, a final review is completed. The final version of the agreement is then approved by both parties and their legal advisors.

The agreement is executed by being signed by authorized representatives of both parties. In some cases, the signing may be witnessed or notarized to provide additional legal validation.

The executed agreement is stored digitally in a shared drive of some sort where the contracts will be accessed and tracked going forward.

Finally, the agreement includes timelines and obligations that need to be monitored. Parties ensure compliance with the terms of the agreement, tracking any actions that need to be taken post-closing – such as the transfer of assets or payments. This ongoing management helps prevent any breaches and ensures smooth post-sale operations.

Challenges of managing business sale agreement templates

Managing BSAs can be challenging due to:

• Complexity – these agreements can be lengthy and detailed, making them difficult to draft and review.
• Collaboration – multiple parties need to collaborate, which can lead to miscommunication and delays.
• Compliance – ensuring the agreement complies with all relevant laws and regulations is crucial but can be complex.
• Data management – handling sensitive business data requires stringent data protection measures.
• Tracking changes – keeping track of revisions and ensuring all changes are approved by both parties can be tedious.

How to manage business sale agreements better with Juro

Juro can streamline the management of business sale agreements and the subsequent contracts that follow a business sale through its AI-native contract management platform. Here’s how Juro can assist:

Centralized contract repository

Juro provides a secure place to store all contracts, including business sale agreements and related documents. This ensures that all parties have easy access to the latest versions of all documents.

Automated workflows

Juro's platform allows contract workflows – drafting, approval and execution – to be automated, reducing the time and effort required to manage these processes manually. Automated reminders for key dates and obligations help to ensure compliance.

Collaboration and negotiation

Juro enables real-time collaboration and negotiation within the platform. Parties can comment, suggest changes and track revisions directly in the document, which facilitates smoother and faster negotiations and makes sure everyone’s on the same page.

AI-driven insights

Juro’s AI capabilities provide insights into contract terms, potential risks and compliance issues. This can be particularly useful for analyzing the terms of a business sale agreement and ensuring that all subsequent contracts align with the agreed terms.

Electronic signatures

The platform supports eSignatures, allowing contracts to be quickly and securely executed. This is essential for finalizing business sale agreements and any related documents promptly.

Integration with existing tools

Juro integrates seamlessly with other business tools such as CRM systems, project management software and financial systems. This ensures that contract data flows smoothly across different platforms, improving overall efficiency.

Template management

With Juro, businesses can create and manage contract templates. This ensures consistency in contract language and terms, reducing the risk of errors and omissions in subsequent contracts following a business sale.

Audit trails and compliance

The platform maintains detailed audit trails of all contract activities. This is crucial for compliance and for resolving any disputes that may arise post-sale. The audit trails provide a clear record of all actions taken on the contract.

By leveraging Juro’s comprehensive contract management capabilities, businesses can efficiently manage business sale agreements and ensure that all subsequent contracts are handled with the same level of diligence and accuracy. This leads to smoother transactions and better post-sale integration.

Juro's AI-native contract automation platform empowers all teams to create, agree, execute and manage contracts up to 10x faster than traditional tools. To find out more, hit the button below to book your personalized demo.