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For many business owners, the main aim of any company sale is to find a suitable buyer and obtain a reasonable sale price. Among other terms in your business sale agreement, there might be a clause requiring you to train the new owners of your business. This article will consider your post-sale obligations and whether you should agree to train new owners upon the sale of your UK company.
How Does Conducting Training Benefit You?
It is not a legal requirement or industry standard for sellers to train the oncoming owner of their business. However, in negotiation with the potential new owner, you might agree that doing so benefits both parties.
As the existing owner of the company, you have specific knowledge of how the business works, as well as a relationship with staff members and business contacts. In this way, you can provide any new owner with vital information on how the business operates and makes a profit.
Likewise, in agreeing to train the new owners, you might be able to negotiate a higher sale price or other conditions within the sale agreement.
LegalVision’s Buying a Business: Guide to Negotiating Terms allows you to protect yourself by understanding which key terms to negotiate when buying a business.
What Does Training a New Owner Involve?
Whilst much will depend on the nature of the company, most training sessions will explore the following:
- how the business operates from day to day;
- the names and roles of essential staff members;
- the identities of crucial suppliers, contractors and clients; and
- any methods by which the company achieves profit or enhances staff productivity.
Some business sale agreements will include a clause requiring the outgoing owner to spend at least a certain amount of hours training the incoming owners. For example, the agreement may dictate that the outgoing owner:
- provides no less than 10 hours of training regarding the general operation of the business; and
- provides at least 4 hours of training regarding relevant business accounts (including a spreadsheet of accounts, usernames and passwords).
Naturally, small businesses may require a shorter training programme than larger organisations.
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When Does Training Occur?
Training a new owner can occur before or after the ownership transfer. Some parties agree to train before the sale takes effect, known as pre-completion training. This tends to result in face-to-face meetings in which the respective owners chat about the general operation of the business and key tasks to undertake upon taking control.
Alternatively, the parties can agree that training will only occur after the sale takes effect, known as post-completion. This can happen where the seller only wishes to commit the time to do so upon the sale being effective. However, this can sometimes be awkward for the individuals involved (and staff) as there will be an old and new owner in the building simultaneously.
Can I Charge a Fee for Charging the New Owner?
You can reflect the hours of training you will undertake in the sale price of your business. As such, the sale agreement will usually confirm the details of the training rather than setting an additional fee.
Similarly, some people will only agree to the provision of training if they believe that the operation of the business is exceptionally complex or the new owners need to gain more knowledge of that sector. If the incoming owners have previous business success and good business skills, the seller is unlikely to regard them as needing additional training.
What if I Refuse to Train the New Owners?
You may be selling the business to take a step away from the industry and wish to leave on the transfer date and not look back. In this case, prolonging your involvement with the business to help train the new owners will be difficult.
The decision of whether to train new owners is part of standard negotiations upon a business sale, so you need to weigh up the pros and cons. On the one hand, you are in charge of whether you offer training, but, on the flip side, refusing to do so may risk the sale.
Notably, there is no legal requirement to train new owners. However, once you agree to train the new owners and it becomes part of your binding sale contract, you have a contractual (legal) obligation to follow through with your promise.
Key Takeaways
There is no legal requirement for outcoming business owners to provide training to new owners. Instead, this is a point of negotiation when attempting to agree on the wording of sale and purchase documentation.
Many business sellers will make this decision on a personal basis, dependent on the identity of the new owners and any strong emotional connection to the business. Whilst some owners may feel that their closeness to the company means they desperately want the new owners to succeed, others may wish to depart quickly.
If you need assistance drafting the terms of your business sale agreement, our experienced business sale lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Whether you offer to train new owners will depend on the situation surrounding the sale of your business. If the new owners have a history of running successful companies in the same sector, conducting training might not be worth your time. However, if the new owner is in a position to pay a higher sale price that suits you, you might decide to train them.
No, current and future owners can train via video conference or telephone. Much will depend on the preferences of the parties and the wording of the relevant sale and purchase documentation.
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