Your responsibilities and liabilities when selling your business
The warranties and indemnities you may have to provide to buyers; protecting your employees.
A key part of any offer will be the responsibility you have to take on for any business liabilities such as employees, outstanding debts, tax and VAT obligations.
It's likely that your buyer will ask you to provide them with reassurance about what they've bought and protection against future liabilities in the shape of warranties and indemnities.
Warranties
Warranties provide legal confirmation that certain facts relating to the sale of the business are accurate. For example, you might have to guarantee that financial information you have shown to the buyer is accurate and that the assets you claim to own exist. The buyer may be able to claim against you if the information is later found to be incorrect.
Indemnities
Indemnities are promises to reimburse the buyer for any losses resulting from specified future events. For example, you may have to indemnify the buyer against any penalties resulting from tax or VAT inspections into accounts drawn up before they took over the business.
Giving these commitments may help you get a higher price. But you need to clarify exactly what you stand to lose. Before you agree any warranties and indemnities they should always be scrutinised by your team of advisers. See hire professional services.
Responsibilities to staff
You may also want to consider how a deal will affect your employees - you may want to come to an agreement that there will be no redundancies for a set period, for example. You should also check your legal responsibilities to staff under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). See responsibilities to employees if you buy or sell a business.