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The Sale Of A Business

Thinking of selling your business? Here are some points to consider during the process.

The sale of a business can be either in respect of a company’s assets, shares or member interest, or a sale as a going concern. For this article let us look at selling a business as a going concern. Selling a business as a going concern means either selling the entire trade or selling only a function of the business. In both instances, the business or function is sold inclusive of the goodwill and stock, i.e. all employment contracts or contracts outsourcing certain functions of the business. Such contracts will be transferred under the same conditions from the previous employer/owner to the new employer/owner. This is in terms of section 197 of the Labour Relations Act.

Selling a business as a going concern comes with benefits, one being that the transaction is considered as “zero-rated” (purchaser does not pay VAT on the purchase price) subject to both parties being VAT vendors and subject to an agreement in writing to this effect.

An important aspect to take note of is found in Section 34 of the Insolvency Act. This section requires a Trader selling or transferring its business, the goodwill thereof, or goods or property forming part of such business, except in the ordinary course of business or for securing the payment of a debt, to publish a notice to that effect. The purpose of the publication is to provide creditors of the business with notice of the sale or transfer of the business, thus enabling them to claim any debts due to them from the seller before the transfer takes place. The notice must be published in the Government Gazette and two issues of an English and Afrikaans newspaper which are circulated in the district in which the business is carried on and must be published not less than 30 days and not more than 60 days before the date of transfer.

Why is this particular section important? Because failure to publish the notice as required can render the entire sale void as against the seller’s creditors and trustees of the insolvent estate in the event that the seller is sequestrated.

For more information on selling your business and other contract-related matters, contact Myers Attorneys at

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