Selling your business

Company valuation: how much is your business worth?

Draw up a memorandum of sale to determine the worth of your business. This memorandum contains extensive company information, for instance the sales price and how you have set it; this way, you can show the buyer what exactly you are selling. Include, for example:

• Business premises. If you rent premises, you need the owner’s permission. To take out a mortgage or end one, you go to the bank.
• Intellectual property. For instance, copyrights, trademarks, patents, and design rights.
• Current court cases, product liability and warranties.
• Current contracts, phone numbers and subscriptions.

The value of your company is not only measured in tangible assets. Your goodwill influences your company’s value as well. Do you need advice? Contact NiRV, the sector organisation for valuators in the Netherlands. Their website is only in Dutch, but they can help you find an expert to determine how much your business is worth.

Selling or ending an empty BV

An empty BV is a 'dormant' company that administratively still exists, often only with a bank account. The BV is no longer active and there are no more assets (income) or debts. An empty BV does cost money, because you still have to file annual accounts.

An empty BV is usually not worth much. However, there are costs when you sell your BV. Such as for the accountant, civil-law notary, and tax adviser. And if the balance of the annual accounts are negative, you as the seller or the major shareholder usually pay this loss.

Do you have a BV you no longer do business with and want to sell it? Then you need to arrange this:

• See if you can sell shares and ask a civil-law notary to transfer them
• Prepare financial statements, preferably with an audit opinion
• Make sure the balance sheet is correct: assets (income or possessions) are empty and liabilities (debts) should be clear

Turboliquidation: if selling costs more than it brings in

You must make sure that the buyer of your empty BV does not have to deal with creditors after the sale. The BV must be truly empty and must not have a negative value. Does selling cost you more than it brings in? Then you can also opt for a fast-track liquidation. This is a way to end the BV and no longer have any costs.

Draw up a confidentiality agreement

In the sales memorandum and during sales talks you share confidential information about your company. To ensure that this information stays between you and the potential buyer, you ask them to sign a confidentiality agreement. This agreement states, for instance:

• which information must remain confidential;
• who is allowed to view the information;
• what happens if the confidentiality agreement is breached;
• the period during which the agreement is valid.

Draw up a declaration of intent

Make agreements about the negotiation procedure, and record them in a declaration or letter of intent. Be aware that the agreements you record in the letter of intent are binding. Violation of the declaration of intent has financial consequences, both for you and the buyer. You can draw up a preliminary purchase contract with the buyer, if the letter of intent shows that you agree on the main issues.

What happens with your employees?

Do you employ staff? Usually, the staff of a company is transferred to the new owner. The buyer is not allowed to make any changes in their contracts and labour conditions. All running procedures are also transmitted to the buyer: dismissal, illness, hiring new employees.

You must disclose information

The buyer can ask for a due diligence investigation to establish the accuracy of your figures, prognoses, and conjectures. This will give the buyer a better idea of who your customers are, and how many contracts you have. You are under an obligation to disclose information. This means you must give accurate and sufficient information about your company.

Signing the purchase agreement

You draw up the final purchase agreement together with the buyer. This contract is the basis for tackling any future disputes. The contract contains information about (among other things):

• what you sell. For instance real estate, inventory, stock or goodwill;
• the sales price;
• the payment method;
• cancellation clauses;
• date of transfer;
• if you will continue to be involved in the company;
• guarantees;
• administration;
• transfer procedure;
• staff matters
• competition clause.

Use a notary for the transfer of shares

When you sell shares in a private or public limited company (BV or NV), you use the services of a notary. The share transfer is done by notarial deed. When you sell a sole proprietorship, a commercial partnership, or a private limited company’s assets and liabilities, you don’t need a notary.

Report the company transfer to KVK and the Tax Administration

You must report to KVK that you are transferring the company, and to whom. The company will then no longer be registered in your name. KVK will also notify the Tax Administration.

Settle with the Tax Administration

As soon as KVK has reported your deregistration, the Tax Administration can settle with you. For instance, do you have a retirement reserve? That will probably influence your profit, and your income tax. What you need to settle with the Tax Administration depends on your business’ legal structure.

Financing options for the buyer

You can help the buyer finance the transfer of your company by alternative means. This often means you will remain involved in your company for a while. Examples of these financing options are:

• a subordinated loan (where you agree to come last in the line of creditors, in case of bankruptcy);
• profit-sharing rights/earn-out;
• leasing;
• gradual transfer.

Keep your business records

Even after the sale of your company, you or the buyer have to keep your business records for at least 7 years. You can store them digitally if you want. Lay down who will keep the records in the purchase agreement. When you sell real estate, like business premises, you have to keep the records for 10 years.

Exception: selling to family

Taking over a family business works the same way as taking over any other business. But if the transfer is a gift or an inheritance, you must pay inheritance tax. You must inform the Tax Administration.