If you are looking for a way to quickly and efficiently liquidate your company's assets while avoiding the high costs associated with selling those assets individually, selling the entire company may be the ideal option for you. This option is particularly beneficial for owners whose company is worth more than its assets. Also, it is good for business owners who wish to maintain the continuity of their business for the sake of their employees, clients, and suppliers.
It is also great for owners of companies with no assets or liabilities who wish to avoid the expensive liquidation process. This process typically takes no less than 6 months.
To learn more about the options and benefits that selling your company can offer not only to you but also to all other parties involved in this process, read this text to the end.
1.Sale of a company in bankruptcy process: Solution for collective creditor satisfaction
The sale of a company in the bankruptcy process is a beneficial solution for business owners unable to pay their debts. It allows for the collective settlement of creditors through the sale of the company.
Some advantages of selling a bankrupt company include:
- Better settlement for creditors. The company may be worth more than its individual assets.
- Lower costs compared to selling individual assets of the company.
- Preservation of legal personality, as the company continues to exist and operate.
The Bankruptcy Law regulates this process, initiated by a bankruptcy order. Subsequently, certain conditions must be met. For instance, demonstrating the feasibility of selling the bankrupt entity as a legal person. Specifically that such a sale is more beneficial than selling the debtor's assets. Moreover, one must inform secured and preferential creditors of the intention to sell. One must submit it along with the sales plan. The creditors receive information at least 15 days before advertising the sale or conducting the sale itself.
If the sale of the bankrupt company occurs, the bankruptcy proceedings temporarily stop. It stops in relation to the company itself but continues in relation to the bankruptcy assets.
2. Sale of an LLC with debts: What to consider?
If you are forced to sell your LLC due to poor business performance and debts you cannot settle, you'll be pleased to know that selling an LLC with debts is possible! Whether you are indebted to banks or suppliers it is the same. The process of selling an LLC with debts can be quite efficient. We recommend you consult with a specialized lawyer to draft the agreement.
The agreement includes information about the change of ownership, directors, and registered office. These items usually change simultaneously with the change of a member in an LLC. The agreement must be notarized. It's also necessary to complete specific forms for the Business Registers Agency (APR) and submit them. The entire process, assisted by a lawyer, is completed in just a few days.
3. Sale of a company under seizure: Are there differences from selling a company with debts?
If your company's bank accounts are blocked due to unpaid debts, you can still sell your company. The process is similar to selling a company without blocked bank accounts. In this case, the buyer takes over the company with all its blocked accounts and obligations. This must be addressed to continue operations. However, this is no longer the seller's concern or responsibility.
4. Sale of a company process: Steps from start to finish
Selling a company, whether it involves selling shares or assets, can be a lengthy process. It requires experts such as corporate and contract lawyers and tax professionals. While there is no strictly defined procedure, there are several key steps that need to be followed for a successful sale.
The first among them is the Letter of Intent. This is a non-binding legal document used to gauge interest in purchasing the company, containing basic information about the sale (parties involved, subject of the sale, price, etc.). This letter informs the seller that the buyer is ready to enter negotiations. It says that the buyer intends to acquire the company at a specified price. However, this is contingent upon the company not having undisclosed debts or obligations that could affect the price. This would become apparent during the due diligence process.
It is important to establish other agreements such as the Non-Disclosure Agreement (NDA). This is to protect the confidential information of the seller. Also, an exclusivity agreement is preferable. It grants the interested buyer the sole right to negotiate for a certain period. These agreements are legally binding.
Here's a bit more about these contracts:
- The NDA allows the seller to disclose financial statements, contracts, and other critical business documents to the buyer for due diligence purposes, without the risk of the buyer disclosing that information to competitors or third parties.
- The exclusivity agreement ensures the buyer that the seller will not negotiate with other potential buyers during a specified period.
Next comes one of the most crucial parts of selling a company: due diligence. This term refers to the detailed legal and financial analysis of the company, typically conducted by the buyer, to assess the value of the company being purchased and the risks associated with the acquisition.
Only after completing the above steps does the Share/Asset Purchase Agreement follow, detailing the terms of the sale. As mentioned earlier, this agreement is notarized and registered with the Business Registers Agency (APR).
In essence, it's important to note that all these contracts and actions, except the share transfer agreement, are not mandatory for buying or selling a company. However, purchasing a company without conducting due diligence poses the risk that undisclosed debts may emerge post-purchase, which the buyer was not aware of.
Note: After purchasing a company, it's mandatory to inform the bank where the company holds its current account and enter into a new agreement with the bank.
5. Additional notes regarding the process of selling a company: Important for companies with multiple owners!
If your company has multiple owners, it's important to know that you need the consent of the assembly (general meeting) to sell shares.
Since the sale of shares affects the assets and future of the company, and consequently all owners, assembly consent ensures that the sale is conducted in line with the interests of all owners, not just those wishing to sell their shares.
Another crucial point to consider is that when selling a portion of shares, you must check the company's founding document for the right of first refusal.
The right of first refusal gives existing owners the right to purchase shares being sold before they are sold to an external buyer. If the founding document includes this right, you must first offer your shares to other owners. Only if they decline can you then offer the shares to an external buyer (and not necessarily at a better or more favorable price).
This approach protects the interests of existing owners and ensures their control over the ownership of the company.
6. Sale of a company from abroad: The role of a special power of attorney
If you want to sell your company from abroad or buy it through a lawyer, the most practical solution is to do so through an authorized person acting under a special power of attorney.
This approach avoids unnecessary travel to the country where the company is being sold, saving you time and money. An authorized person, especially if they are skilled in these matters, can facilitate more efficient communication with the buyer or seller and relevant institutions in the country where the company is located.
Note: In some cases, powers of attorney executed abroad may require an apostille or another seal. This can be an international certificate validating the authenticity of the signature and authority of the authorized person. For more information, consult your lawyer-authorized representative.
7. Sale of a company and taxes
Legal entities - residents, when they sell a stake in another legal entity, pay a 15% capital gains tax on the sale of the stake.
On the other hand, foreign legal entities - non-residents, when they sell a Serbian legal entity, also pay a 15% capital gains tax on the sale of the stake, unless a double taxation avoidance agreement specifies otherwise.
As for individuals - residents, they also pay a 15% capital gains tax on the sale of a stake, except in certain cases, such as ownership of the stake for more than 10 years.
For more information on the tax aspects of selling a company, contact a tax advisory lawyer.
8. Sale of a company in liquidation
Sale of a company that is in the process of liquidation is possible until the moment when the Business Registers Agency (APR) issues a decision to delete the company from the register. Even when a company is undergoing liquidation, owners have the option to sell their stake. This allows buyers to take over the company. They can either complete the liquidation process or continue operations if feasible.
However, it is crucial that all transactions are completed before APR formally deletes the company from the register. Once this happens, the company ceases to exist as a legal entity. The transfer of shares becomes impossible then.
Final Word
This text aims to inform about the legal and transparent ways of selling a company. Pekić Law Firm does not endorse or participate in fraudulent sales processes or unethical business practices. Therefore, we urge all sellers to exercise caution when dealing with unknown buyers before making a final decision on the sale.
Advokatska Kancelarija Pekić ne podržava i ne učestvuje u prevarnim prodajnim postupcima ili neetičnim ponašanjima u poslovanju, te stoga pozivamo sve prodavce firmi da budu oprezni u poslovanju sa nepoznatim kupcima pre donošenja konačne odluku o prodaji.
If you have further questions or need a lawyer for selling or buying a company, please contact us at [email protected]
