When deciding to buy or sell a business, drafting a purchase and sale agreement (PSA Agreement) is essential. Here are some key points to include:
- Purchase Price/Object: Will it be purchasing company assets or acquiring shares?
- Earnest Money and Closing Date: Initial deposit and date of the final transaction.
- Due Diligence Period and Contents: Investigating the business thoroughly.
- Contingencies: Tax clearance (no tax due certificate), lease assignment, Certificate of Occupancy, loans.
- Representations from Both Parties: Confirming transaction authority, liabilities, any pending lawsuits, “As is” condition.
- Activity Restrictions in Similar Industries.
- Miscellaneous: Solutions for breach of contract, jurisdiction, cost allocation.
A contract is a written agreement between two parties, capturing their understanding of the deal. In Texas, the emphasis is on interpreting the “intent” of the parties.
The need for a PSA:
- The PSA helps both parties understand the transaction.
Without a PSA:
- Buyers may end up with unexpected debts, tax issues, or lease problems after paying.
- Sellers may face claims of fraud or lawsuits after the transaction.
The role of attorneys:
- Closing agents and ancillary professionals are not the buyer’s attorneys and cannot provide legal advice.
- Brokers are the seller’s agents, and sellers cannot fully avoid responsibility.
Final advice: Buyers must conduct due diligence before purchasing to avoid potential issues. Sellers should ensure a clean and transparent transition. Remember, the responsibility ultimately lies with the individuals involved, and seeking legal advice is crucial throughout the process.
Sul Lee Law Firm | Phone: 214.206.4064
3030 Lyndon B Johnson Freeway, Suite 220, Dallas, TX 75234