Introduction of Purchaser of Shares or a Business

February 2020

A business owner who has built up and run the business over a substantial period might wish to exit that business for various reasons. There might be a number of ready and willing purchasers of the business to whom the owner might sell, but the owner might not know of them or be able to find them.

To make the task of finding potential purchasers easier, the owner can employ the services of a specialist broker (a “finder”) whose business it is to find and introduce potential purchasers of businesses.

It is important that the seller ensures that its appointment of a “finder” is on detailed terms of agreement, covering all relevant aspects of the intended relationship between seller and finder. This will minimise the risk of misunderstandings and disputes arising between them. Two new forms of Agreement have been added to the Corporate folder, one to cater for a sale of all assets of a business, the other to cater for sale of all shares in a business.

Under the Finder’s Fee Agreement (Sale of Shares), a company appoints the “finder” as an intermediary to identify and introduce to the company potential buyers of all of the company’s shares. If the finder introduces a buyer which proceeds to buy the shares, the finder earns a commission from the company in return for that successful introduction.

Under the Finder’s Fee Agreement (Sale of Business), a business owner similarly appoints a finder to introduce potential buyers of all of the business assets, in return for a commission paid by the business.

These new templates contain detailed terms to protect and clarify the legal position of both parties. These forms of agreement are suitable for use where either:

· The seller wishes to propose to a finder terms of appointment to govern the appointment; or

· A finder wishes to have standard terms of business for appointment by a seller.

Certain provisions in both of these documents slightly favour the finder, making them particularly suited for use by a finder who requires standard terms on which it can operate when dealing with sellers.

Both forms of agreement can be used to appoint a finder on either an exclusive or non-exclusive basis.

These template forms both contain optional clauses which can be added where the finder is also required by the seller to provide additional services to facilitate the sale process after the finder has found and introduced a purchaser. For example, the seller might require the finder to assist with negotiating terms of sale, advise on strategy or structure, or provide liaison between seller and purchaser. In return the seller agrees to pay a monthly retainer fee.

Once a finder has introduced a seller to a purchaser, the seller and purchaser will need to negotiate and set out in a detailed agreement all of the terms of sale. At that stage, you might wish to make use of one of the various template sale agreements which you can find in the Shares, Company, Asset or Business Sale Documents subfolder in the Corporate folder.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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