Client: Mr & Mrs McCarthy
Matter: Share Sale
Fee Earner: David Hughes
Mr & Mrs McCarthy are shareholders in L.E Cramer Motor Engineers Limited in Watford. The have been shareholders for around 20 years and are looking to retire and sell their company.
They reached an agreement to sell their shares to one of their employees who was hired two years ago and has been trained to take over the company. Mr & Mrs McCarthy had a good relationship with the buyer and wanted a simple and smooth process when selling.
The couple approached David Hughes to assist with the sale of their company as David has extensive experience with company matters such as shareholder agreements, company sales and purchases, consultancy agreements, share reorganisations, directors and all things in between. David’s aim was to draft a fairly balanced agreement between Mr and Mrs McCarthy and the buyer whilst liaising with the buyer’s solicitor.
The Share Sale process follows a standard format. The clients, their accountants and with help from their solicitors agree a heads of terms which contains the main terms of the deal such as overall price, payment structure, funding arrangements, indemnities against known problems and the sellers’ ongoing involvement. The share purchase agreement is then drafted and the terms of the contract will be negotiated and need to be agreed by the buyer’s solicitor and the seller’s solicitor.
Perrin Myddelton’s approach is always to ensure that the sale is kept in perspective and that our client is pleased with the end result as we take pride in our customer service and delivering on goals set by our client.
The buyer eventually came up with some of the funds for a partial payment. We reached a compromise agreement between the sellers and the buyer for £400,000 to be paid upfront and £80,000 in instalments over 2 years. Mr & Mrs McCarthy were happy with this arrangement as it was a good amount upfront.
David was able to draft step-in rights to allow the McCarthy’s to “step-in” and take control of the company again if the buyer was unable to meet the instalment payments.
The Solicitor acting on behalf of the buyer already knew the sellers very well and this good relationship allowed a very smooth process. The buyer’s solicitor and David Hughes were able to establish a friendly relationship which helped find solutions for some tricky issues that arose due to the buyers funding.
During the sale of the company, there were challenges with the buyer raising sufficient funds to purchase the shares. This delayed the sale for a few months until the buyer could produce the funds through re-mortgaging a property and family loans.