Legal Framework

Selling a business is not just about agreeing a price it also requires a clear legal process to protect both buyer and seller. The legal framework helps ensure that the deal is properly documented, risks are understood, and everyone knows what they are committing to.
 

Heads of Terms: What They Are and Why They Matter

Heads of Terms (sometimes called a Letter of Intent) is the initial written agreement between buyer and seller.

• It sets out the main terms of the deal: price, structure, timetable, and key conditions.

• It is usually not legally binding (except on matters such as confidentiality and exclusivity).

• Its purpose is to make sure both parties are aligned before spending time and money on detailed contracts.

Think of it as a “blueprint” for the deal, not the final contract, but a crucial step in setting expectations.
 

Due Diligence Explained

Due diligence is the process where the buyer investigates the business in detail to confirm everything is as represented. It normally covers:

• Financial due diligence – Reviewing accounts, tax records, forecasts, and cash flow.

• Legal due diligence – Checking contracts, ownership of assets, disputes, intellectual property, and regulatory filings.

• Operational due diligence – Assessing staff, systems, suppliers, and customers.

While it can feel intrusive, due diligence is standard in every deal. The better prepared your records, the smoother and faster this process will be.
 

The Share Purchase Agreement (SPA): What Sellers Should Expect

The Share Purchase Agreement (SPA) is the final, legally binding contract that transfers ownership of the business.

• It documents the agreed price, deal structure, and payment terms.

• It sets out warranties and indemnities — seller assurances about the state of the business.

• It includes provisions on completion accounts, restrictive covenants, and any deferred consideration.

The SPA is usually a detailed document, negotiated with input from legal and tax advisers. Sellers should ensure they understand their obligations as well as their rights.
 

Final Thoughts

The legal framework of a business sale can seem complex, but its purpose is to give both sides clarity and protection. With the right preparation and professional advice, sellers can move through these steps with confidence, knowing the deal is properly secured.
 

Note: This overview is for general guidance only and should not be considered legal advice. Independent legal advice should always be obtained when selling a business.