Term Sheet For Sale Of Business Template for New Zealand

When you're considering selling or buying a business in New Zealand, a Term Sheet for Sale of Business serves as your critical first step in documenting the proposed transaction. This preliminary agreement outlines the fundamental deal terms while providing a structured framework for negotiations, helping both parties understand their commitments before investing in expensive due diligence and legal documentation.

When do you need this document?

You'll need a term sheet when you've moved beyond initial discussions and want to formalise the basic terms of your business sale. This typically occurs after you've identified a serious buyer or seller and conducted preliminary negotiations about price and structure. The document is essential when selling established businesses, franchises, or professional practices where multiple assets and complex arrangements are involved. You'll also need it when the transaction involves multiple parties such as shareholders, guarantors, or when there are employment considerations that need early clarification.

Key legal considerations

Your term sheet should clearly distinguish between binding and non-binding provisions. While most commercial terms remain non-binding, confidentiality clauses, exclusivity periods, and good faith negotiation obligations are typically legally enforceable. You must carefully structure the purchase price terms, including any earn-out provisions, working capital adjustments, or conditional payments. Consider including provisions for key employee retention, customer contract transfers, and intellectual property rights. The document should address due diligence scope and timelines, conditions precedent for completion, and termination rights. You'll also need to consider warranty and indemnity frameworks, even if detailed terms will be negotiated later.

Legal requirements in New Zealand

Under the Contract and Commercial Law Act 2017, your term sheet must comply with general contract formation principles, even for non-binding sections. The Companies Act 1993 requires consideration of shareholder approval requirements and company record obligations when shares are being transferred. You must ensure compliance with the Fair Trading Act 1986 by avoiding misleading or deceptive conduct in your representations about the business. The Commerce Act 1986 may require clearance notifications for transactions that could substantially lessen competition in New Zealand markets. Employment Relations Act 2000 provisions must be considered to protect employee rights during the business transfer, including potential redundancy obligations and continuity of employment arrangements.