Commitment to Sell a Business

Commitment to Sell a Business

The commitment to sell a business is a document that summarizes all the elements of a business transfer or transmission. This document serves as a basis for drafting the final sales contract and can take two forms:

• Unilateral promise of sale (commitment of one of the parties to contract).
• Synallagmatic promise or compromise of sale (reciprocal commitment of the parties).

The commitment to sell a business is important because it ensures that all the documents and information provided by the seller are considered valid and reliable during the price and conditions negotiation. After signing the agreement, the potential buyer will have the opportunity to verify or have the information checked by a specialized firm.

The promise to sell a business is usually accompanied by:

• Conditions related to the required authorizations and approvals needed to operate the business or obtain loans.
• Payment of a sum generally equivalent to 5-10% of the transaction amount, as compensation for immobilization.

To avoid incurring unnecessary costs for both parties and to prevent buyers from coming “just to see,” it is possible to charge the party that ends the discussion with a penalty for breaking off the negotiation.

The commitment must be precise on all points of the business transfer. Any breakdown in discussion at this stage is detrimental to the company being sold.