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If you are a business owner of a limited liability company in New Zealand, there are a few things you should consider if you are looking to sell your company. First of all, you will need to keep in mind that selling a ‘company’ is different from selling a ‘business’. When you sell your company, you sell all of the shares you own in that company to another person.

Suppose instead, that you are selling the business operated by your company. In that case, your company is transferring the business and assets of the business to that other person. This is know as an asset or business sale. This article will focus on the steps needed to conduct and finalise a share sale after you have found the right buyer for your company. This includes:

  1. entering into a share sale agreement with the buyer;
  2. negotiating and signing the share sale agreement;
  3. preparing for completion; and
  4. completion and updating the companies register.

Share Sale Agreement

Once you and the potential buyer have agreed on the commercial terms of the sale (e.g. purchase price, the timing for the sale, etc.), it is time to document those terms in a legally binding share sale agreement. This document will set out how you and the buyer will complete the sale. It should include information like the:

  • payment terms;
  • promises you are making to the buyer about the company;
  • company protections (e.g. a non-compete); and 
  • other general legal clauses (e.g. governing law, confidentiality, intellectual property, etc.).

As the business owner and seller, it is generally your responsibility to prepare this agreement. You should engage the services of a lawyer experienced in company sales. They can ensure that the share sale agreement is prepared correctly and takes into account your interests.

Negotiating and Signing the Share Sale Agreement

After your lawyer has prepared the agreement and you are happy with its terms, you will need to provide it to the buyer to review. They will likely also engage a lawyer to assist them and help them negotiate any changes to the agreement that they feel are in their best interests. There will usually be a period where both of you will negotiate these changes before you agree on the final terms of the share sale agreement.

Once you agree on the terms of the document, both you and the buyer will sign the agreement. After you have exchanged your signed copies, the share sale agreement will be legally binding.

Preparing for Completion

The date that the buyer takes over the ownership of your shares is called completion or settlement. During this stage, there are often many tasks that both you and the buyer need to finish between signing the agreement and getting ready to transfer ownership of the company. As the seller, you may need to obtain the consent of your key suppliers and customers and landlord to the sale of the company to the buyer.

This process will be relevant if you have written contracts or a property lease that includes a ‘change of control’ clause. You will also need to arrange for the release of any personal guarantees you have provided on behalf of your company (e.g. to support a loan your company has with a bank). As the buyer will own your company from completion, you do not still want to be on the hook personally for the loan once they have taken over.

During this time, your lawyer or accountant will also prepare the company secretarial documents. These documents are needed to approve the sale and transfer your shares to the buyer. These include a:

  • resolution of the board of directors of your company approving the sale;
  • resolution of the shareholders of the company waiving any rights they have to purchase your shares instead of the buyer purchasing them (if there are other shareholders);
  • share transfer form;
  • letter of resignation for you to resign as a director (and company secretary, if relevant) of the company; and
  • consent to act as a director (and company secretary, if applicable) to be signed by the buyer (as they will need to become the director on completion).

Completion and Updating the Companies Register 

After you and the buyer have finalised all of the tasks needed to be ready to complete the sale, the date of completion will arrive. On that date:

  • you and the new owner will need to sign the company secretarial documents mentioned in the previous section; and 
  • the new owner will need to pay you the value for your shares.

Once you and the new owner have finished these tasks, then you would have completed the sale of your company. The buyer will need to arrange to update the Companies Register of the sale and your resignation as director. This update must be done using the company’s ‘RealMe’ online services account and can be done at the time of completion, or at the time of the lodgement of the company’s annual return. There is no fee, or late fee, to notifying the Companies Register of the share transfer.

Key Takeaways

There are several steps to follow if you want to sell your company. As the seller, you want to make sure that you document your obligations and responsibilities in your best interests in the share sale agreement, and that you are comfortable meeting your pre-completion and completion obligations to finalise the sale. If you have any questioning about selling your company, contact LegalVision’s sale of business lawyers on 0800 005 570 or fill out the form on this page.

What is a share sale agreement?

A share sale agreement is a legal document which will set out how you and the buyer will complete the sale. 

What is completion?

The date that the buyer takes over the ownership of your shares is called completion or settlement.

When should I update the Companies Register?

Once the sale is complete, the buyer will need to update the Companies Register of the sale and your resignation as director. They must use the company’s ‘RealMe’ online services account.

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