Sold my business new owner refusing to pay

[Gingerbread987]

I will be contacting a solicitor, but I’m interested in any insight that anyone might have.

In May last year I found out I was sick and would need time off work to recover, I decided the only way to fully get this time off was to sell my business. The business sold in June.

The business is a limited company and so far the new owner has refused to pay the agreed amount. I know from a mutual friend that the new owner is planning on presenting a list of reasons why they shouldn’t pay. Tbh, I did drop the ball on some of them and I think there’s around £500 in unpaid supplier invoices that I didn’t account for. There’s also a small outstanding loan on this business.

I am prepared to negotiate on these points.

has anyone been in a similar position and has any advice? I’ll be speaking to a solicitor but I’d love to know if anyone else has any experience for context.

Surely if they don’t pay they don’t get?

It may depend on the wording of your sale contract.

But if the valuation of your business was based on the assets/liabilities and then they turn out to be different - and by the sounds of things there is a reasonable amount of debt that was not taken into account - then I would fully expect the buyer to negotiate for a reduction.

But obviously they should still be paying something!

(FWIW when I worked for a large company that was taken over, all the accounts were poured over afterwards and the final purchase price ended up being reduced by a few million. It's very normal).

In this case the accounts were clearly incomplete and misleading. Unaccounted invoices and an undeclared loan. So it's not that clear cut.

OP, how was the business valued before the sale? - it would be usual to get an accountant to check the accounts and identify a valuation.

Did you have lawyers involved?

Could you even take the business back at this point ? When I sold my business they didn't get the business till they'd paid for it in full.

I’m not sure the business is legally theirs at this point, the sale contact was they get the business in exchange for a payment of X - that payment hasn’t been made.

Ill be speaking to our solicitor later but it’s baffling me!

How did you sell it? Surely you didn't transfer shares etc until payment had been received at a completion (similar to completing om a property)?

I'm confused by this, how have you sold the business without payment being received? Doesn't sound like em this was done through solicitors.

Surely a contract will have been drawn up via a solicitor to begin with? If not then you were incredibly foolish and naive. Yes you do need to consult a solicitor because if you've drafted your own contract and it isn't watertight, you could well have no business and no money.

A solicitor drew up the contract. One of the new owners is just ignoring it.
The new owners were supposed to pay monthly until they’d paid the full amount (not uncommon) which hasn’t happened yet. We’ve been told the new owner is not going to pay.
We of course are going to speak to a solicitor to handle the next steps however I’d love to hear from anyone who’s been in a similar situation and how it panned out.

Was the buyer a limited company

it was two individuals who bought a limited company

I don't see how hearing another person's experience of a similar situation is going to help you here. It's all going to depend on the wording of your sale contract. A well drafted sales contract would not allow the buyer to withhold payment of deferred elements of the purchase price due to a potential claim. The contract should set out how claims should be dealt with. For example, there might be an indemnity which allows the buyer to claim back some of their loss from you. Or they might have to make a warranty claim. It's really all in the wording. You might have to take them to court to recover the unpaid money, but they might counterclaim for the issues you've mentioned. You need to speak to a solicitor.

The only person that can help with this is your solicitor, who has a copy of the signed contract

You just need to speak to your solicitor, it's all going to come down to the details of the contract and the accounting

My friend had a similar agreement (contracts drawn up by solicitor). Buyer paid a lump sum at the beginning and then the buyer had a certain amount of years to pay the balance with a set minimum each month. If the buyer defaulted at any point then the original owner got the business back immediately and kept the money already paid. And no it didn't go according to plan as after 2 years the new owner fucked the business, drove it into the ground (so no business to take back) and announced that they had nothing so taking them to court would just make them bankrupt. Friend couldn't be arsed to pursue it.......
If they are still trading then absolutely go get your money or resolution!

@Gingerbread987 Who are the current owners / shareholders / directors of the company according to the Companies House website?

Deferred consideration is not unusual but is also not a good idea or recommended for the seller, it’s a huge risk. You are only ever guaranteed the amount you receive on the day of completing the sale, after that point you can only hope to receive the extra payments, but the business is usually fully legally transferred so belongs to the buyers whether they have paid the deferred payments or not. When sellers agree to these payment set ups it’s best to only ever think of the extra payments after completion as a nice extra, not a given you will actually get it and you should have been advised on that at the time.

It’s breach of contract but would be for you to bring legal proceedings to enforce it and if the buyer doesn’t have to the money then it won’t be paid even if you won in court. Did you take any security for the deferred payments? Personal guarantees or legal charge? If so that helps and can enforce against them - but you need advice on if you may have breached anything from your side too

You haven't explained what your solicitor sale of contract states.

I do some work in M&A, for a sale with deferred consideration (which this is) the shares wouldn’t necessarily be transferred until full payment had been made or the outgoing seller would remain as a director until the purchase price, or one of any number of mechanisms would be in place to try and ensure this doesn’t happen. Ultimately though the most risky transactions involve deferred consideration because in reality you can mitigate the risks as best as possible in the share sale agreement but there’s a million and one ways you could wriggle out if you really wanted to.
Equally if your accounts were completely wrong it seems valid that they would try to withold payment for that amount. You’ll need to go back to your solicitor and get some advice on this before it all goes a bit pear shaped! A well drafted contract though should have some mechanism to deal with this

Anyone I know who has ever sold anything on a pay-in-installments basis has never received all the payments. Pets, personal possessions etc. The new owners pay usually about 3/4 of the amount owed then refuse to pay the rest. Every time. Like it's part of some kind of special scammers code or something. Yours is a business so that's a bit different. Do the new owners have access to the business though? Because if they do it sounds the same. Also I guess you do owe them a discount at least for the undeclared debts. The people I knew didn't owe any discount for anything and just got ripped off because they were daft enough to hand over the goods on trust.

You sold it with undeclared loans and outstanding invoices ?

Has there been a full audit of the business?

what is recorded at companies house? Have the share transfer forms been signed?