 Under business sale legislation, buyers of businesses are provided with a specified time in which to conduct an examination of the books and records of the target business. This is to satisfy them that the information upon which they have made their offer to buy is substantially true and correct. This is formally known as “Verification of Books and Records”, but is more commonly known as “due diligence”.
The commonly requested requirements of an accountant or solicitor undertaking due diligence on behalf of a buyer includes:
- Copies of the tax returnes are lodged and assessment for the past 3 years
- A request to view the invoices written by the business over a period (say, 12 months)
- A request to view bank statements and Business Activity Statements for the same period
- A request to view payroll records for the same period
- A list of major clients and any written agreements with clients and/or suppliers
- A request to provide information on any insurance claims/litigation for/against the business
- A review of property and equipment lease terms
- Establishing what intellectual property the seller has in place
Other information required may be found by undertaking searches on the public record relevant to the business being acquired. These searches can reveal undisclosed loans over assets, who actually owns the intellectual property used in the business and whether the property from which the business is operated may beaffected by any adverse proposals.
Having this information ready in advance will instil confidence in the buyer and will make the contract process run smoothly. A seller should not be concerned with the due diligence process, as your Hallmark Business Sales team will be assisting all parties through the process.
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