Key Learnings from Sales Transactions to Enable Founders to be Better Prepared When They Exit.

Aperion Law has provided legal services in relation to several exits, representing the selling
side of the transaction. Based on real life experiences, they have made a list of some key
actions you should be contemplating if you are thinking of exiting your start-up.

  1. Undertake a preliminary due diligence review to satisfy yourself that you are ready
    for the transaction and to identify matters that require remediation.
  2. Classification of workers as contractors will be closely scrutinised – make sure
    workers you think are contractors are indeed contractors.
  3. Likewise, workers classified as casuals will be scrutinised – merely because a contract
    says a worker is a casual employee will not be enough if the employment history
    shows that the worker is in fact a permanent employee.
  4. Understand what contracts you have entered into require you to get approval of the
    counterparty if there is a change in control – leases always have this type of clause
    but often long-term supply contracts also have such a requirement.
  5. Ensure that your taxation obligations are up-to date.
  6. Ensure you understand what working capital the business requires and the extent to
    which that working capital needs to be adjusted for seasonal fluctuations in your
    business.
  7. Ensure that your employment records correctly reflect contingent liabilities for
    accrued recreational and long service leave.
  8. Ensure that you have an up to date list of not only tangible assets, but also intangible
    assets.
  9. If you have deployed open source software, be ready to identify the license terms
    applying to that Open source software and your compliance with those terms.
  10. Clean up any shareholder/director loans – either by paying the loan out or having it
    properly documented.
  11. Ensure you can produce agreements for each worker in your business.
  12. Ensure that you have maintained the registration of any domain names, business
    names, trademarks to be included in the transaction.
  13. Do not sign the letter of intent without legal advice – while this letter will say it is not
    binding, it will be difficult to negotiate variations.
  14. So that you do not close off the opportunity to progress discussions with other
    buyers, ensure that all key terms of a deal are reflected in the letter of intent –
    including the basis on which the price is being calculated (if this is a calculation based
    on earnings or profit) and any amount the buyer will require to be held in retention
    to cover warranty claims and the extent to which the payment of the price is going
    to be deferred or subject to earnings/profit targets being met.

Interested in finding out more? Mark Allen, Director at Aperion law, will deliver a dynamic and
interactive presentation on the hurdles and pitfalls of exiting a company on the 25th
March, 5:30 pm at Level 1, Sydney Startup Hub. Click here to sign up!

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