Small Business Sale Documents: South Africa Checklist

Key takeaways

• Prepare two packs: a business pack showing what is being bought or sold, and a legal-and-finance pack showing who has authority, what is owed, what tax applies and which conditions must be met. Start with the signed offer or sale agreement, company and ownership records, financial and tax records, material contracts, assets and liabilities, employee information, licences, intellectual-property records, communications and a dated list of open issues. Do not assume that selling shares and selling the business assets have the same documents or tax consequences.

First decide what transaction is proposed

Ask whether the buyer will acquire:

• Shares or members’ interests: the entity remains the contracting party, and the pack must show its constitution, authority, ownership records, liabilities, contracts and compliance history.
• Assets or a business as a going concern: the pack must identify each asset, liability, contract, employee, licence, consent and operational handover that is moving or staying behind.
• A mixed transaction: separate the share, asset, property, intellectual-property, employment and tax workstreams instead of treating one short agreement as the whole deal.

This classification should be confirmed in the term sheet and tested by a South African commercial lawyer and tax adviser before money changes hands. The Companies Act 71 of 2008 governs company administration, relationships between companies, shareholders and directors, and certain mergers and takeovers; it does not turn every private sale into the same statutory process.

Build the transaction brief

Write a one-page summary before sending a large folder. Include:

• the legal names, registration numbers and trading names of the parties;
• the proposed structure: shares, assets, business, merger or mixed transfer;
• the buyer’s and seller’s commercial objective;
• price, deposit, earn-out, working-capital or other payment mechanics;
• proposed signing and closing dates;
• conditions still outstanding;
• the person authorised to instruct advisers and approve a settlement or spend;
• known disputes, threatened claims, regulatory issues and important deadlines; and
• the decision the lawyer must help make now.

Separate confirmed facts from assumptions. Mark each number as confirmed, estimated or still being checked.

Company, ownership and authority records

For a company or close corporation, collect the records that show what entity is involved and who may bind it:

• CIPC registration or disclosure records, current registered details and annual-return status;
• the Memorandum of Incorporation, amendments and any shareholders’ or members’ agreement;
• the securities or members’ register, share certificates where held, beneficial-ownership information and transfer history;
• director, shareholder or member details and any conflict declarations;
• board or shareholder resolutions, mandates, powers of attorney and signing authorities;
• loan, guarantee, security, preference-share or option documents; and
• approvals required by the MOI, an agreement, a lender, a regulator or another shareholder.

CIPC says companies must keep their own share records and that beneficial-ownership and securities-register filings have specific filing and update requirements. Check the current CIPC instructions rather than treating a public search result as proof that a share transfer is complete. Do not send confidential beneficial-owner material to an unverified recipient.

Financial, tax and cash-flow records

Give the adviser a consistent period of financial information, not only the spreadsheet that supports the asking price:

• signed annual financial statements and recent management accounts;
• general ledger, trial balance, bank statements and aged debtor and creditor schedules;
• stock, equipment, vehicles, property and other asset registers;
• budgets, forecasts, valuation assumptions and working-capital calculations;
• all loans, leases, overdrafts, guarantees, security and repayment schedules;
• SARS income-tax, VAT, PAYE and other relevant returns, statements and correspondence;
• tax clearance or compliance material where requested by the transaction or tender;
• invoices, credit notes, refunds, cash sales and related-party transactions; and
• a schedule of unpaid liabilities, contingent claims, disputed amounts and promised payments.

SARS treats corporate income tax, VAT and capital gains as separate tax areas, and a disposal can trigger tax even where the parties describe it as a “small business sale”. Confirm the current tax treatment, VAT status and any going-concern requirements with a tax adviser before the agreement fixes the price or allocates liabilities.

Contracts, customers and suppliers

Index every material agreement and note whether it can be assigned, transferred or terminated on a change of control. Include:

• customer and supplier contracts, purchase orders, terms and service levels;
• leases, property agreements, equipment finance and maintenance arrangements;
• distribution, franchise, agency, reseller and logistics agreements;
• confidentiality, non-disclosure, restraint, settlement and guarantee documents;
• insurance policies, claims and broker correspondence;
• licences, permits, registrations and sector approvals;
• open quotations, tenders, complaints, chargebacks, returns and warranty obligations; and
• threatened or existing litigation, arbitration, ombuds, regulator or collection correspondence.

For each contract record the parties, term, renewal date, termination right, consent requirement, outstanding performance and person responsible for the next action. Preserve the signed source and every material schedule; a screenshot or summary is not a substitute for the complete agreement.

Employees, operations and intellectual property

If the business or its operations will continue, identify the people, systems and rights needed to deliver it:

• employment agreements, policies, payroll totals, leave and benefit obligations;
• disciplinary, grievance, bargaining-council or CCMA records that are relevant and lawfully shareable;
• contractor, consultant and key-person agreements;
• health-and-safety, insurance and incident records;
• inventory counts, supplier dependencies, standard operating procedures and handover notes;
• trade marks, domain names, copyright, designs, software licences and source-code ownership;
• privacy notices, data-processing agreements, security incidents and access lists; and
• customer, employee and supplier data inventories, with unrelated personal information excluded from the first review.

Do not upload an entire employee or customer archive to a data room simply because it exists. Ask the adviser what is necessary, how it should be redacted and which records must remain restricted.

Due diligence and disclosure schedule

Create a numbered due-diligence list and disclosure schedule. For each requested item, record the answer, source file, date checked, owner and follow-up. Flag:

• missing records or unexplained changes in revenue, stock or debt;
• assets subject to security, lease, retention of title or third-party rights;
• contracts that require consent or have a change-of-control trigger;
• tax, regulatory, employment, environmental or licensing exposure;
• customer concentration, disputes, refunds or service credits;
• ownership gaps in intellectual property or domains; and
• any fact that makes a warranty, indemnity, condition or price adjustment important.

Do not describe an unanswered question as “no issue”. Use “not provided”, “not verified” or “requires advice” until the evidence supports a conclusion.

Signing, closing and handover documents

Before signing, keep the latest marked-up agreement, schedules, disclosure letter, warranties, indemnities, restraint or confidentiality terms, board or shareholder approvals, finance documents, tax advice and the completion checklist together. At closing, record:

• the signed final documents and signature authority;
• payment, escrow, release and security arrangements;
• share certificates, transfer forms, registers or asset-delivery records;
• third-party consents and licence or account changes;
• keys, passwords, domains, books, systems and physical stock handed over;
• employee and customer communications approved for release; and
• the person responsible for each post-closing filing, payment and notice.

Keep an untouched original folder and a separate working folder for notes. Preserve email headers, document versions and the source of every number.

Common mistakes

• Treating a share sale and an asset sale as interchangeable.
• Signing a term sheet without checking authority, conditions or tax assumptions.
• Giving a buyer a data room with no index, access rules or redaction plan.
• Omitting leases, guarantees, related-party transactions or contingent claims.
• Assuming CIPC or SARS filing status proves that the commercial transaction is complete.
• Sending a warranty, admission, resignation or termination before advice is obtained.
• Deleting inconvenient messages or replacing source records with a rewritten timeline.
• Promising a closing date before consents, funding and due diligence are complete.

When to get advice urgently

Speak to a commercial lawyer promptly if a buyer or seller has threatened to walk away, a deadline or exclusivity period is close, a lender or landlord consent is missing, a regulator or tax authority has written, employees may be affected, a material contract may terminate, assets may be moved, or the other side is asking for a warranty, admission or payment before the records are reviewed. Verify the practitioner through the Legal Practice Council’s current public search and use the firm’s approved secure intake route.

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