Establishing a Liquor Store

Purchase of a Liquor Licensed Business

PLEASE NOTE: We do not apply for liqour licensing on residential stands (at your house) - Click on Rights for further information.

The contract for the purchase and sale of a business can save expensive litigation. It can also eliminate misunderstandings and conflict between the buyer and the seller.
The Sales Agreement of a business must be drawn up by a competent person who has the knowledge and experience in Business Broking.

The three basic Sales Agreements for businesses are:

  • Offer to Purchase – for Sole Proprietors.
  • Offer to Purchase for Shares and Loan Account – for Companies.
  • Offer to Purchase the Member`s Interest and Loan Account – for Close Corporations.

These are specialized contracts and each contract is unique to its circumstances. Unless advised by the purchasers Accountant, do not take an uncalculated risk and take over the Member`s Interest and Loan Account of the seller`s Close Corporation. You can be held liable for the sellers debt.

V. A. T. on the purchase of a business.

The Sale can be structured in such a way that it does not attract V. A. T. on the purchase price. Always deal with competent Business Brokers and Accountants who will assist the buyer and seller in dealing with such matters and in terms of the law.

Stock included in the purchase price.

When stock is included in the purchase price the buyer must take care. The Sales Agreement must clearly state if the stock is calculated at:
  • The rand value of the stock calculated at cost price. (Invoices can be proof of the cost price)
  • Is the stock value including or excluding V. A. T. (check invoices)
All damaged and expired stock must be excluded.

The buyer must realize that that the stock at the effective date (hand over date) may not be fast moving stock. The buyer must therefore provide for the purchase of additional stock.

Advertise the sale in terms of Section 34(1) of the Insolvency Act No. 24 of 1936.

On the Sale of the business it is advisable to publish a notice in terms of Section 34 of the insolvency act so that by the effective date (hand over date), a period of 30 (thirty) to 60 (sixty) days will have elapsed since the publication. Without such notice creditors with valid claims can influence the transaction and lodge a claim.

Liquor License.

  • Make sure the Liquor License is on the name of the seller before concluding the deal. (A liquor license cannot only be held by the building)
  • Make sure that the liquor license of the business you want to buy is valid and renewed by the seller.
  • Insist on an original Liquor License certificate, last year’s renewal advice from the Liquor Board.
  • Proof of payment of the renewal of the Liquor License.
  • Make the above a condition are noted as a condition precedent in your sales agreement (that means that if these conditions have not been fulfilled, a contract has not been concluded). Specifically specify that if the conditions precedent are not fulfilled the seller must place you in a position as if no contract was signed.

A specialist in the field of the Liquor License must be consulted prior to signing the Sales Agreement. The consultant can make sure the license is valid and that it can be transferred to the buyer.
We are Liquor License Consultants and Business Brokers and can assist the buyer and seller in the process of the transfer of a liquor license. We offer free advice on that matter.

Restraint of trade.

A restraint of trade that is reasonable must be imposed upon the seller to prevent the seller from opening a similar business and unfairly compete with the sold business.

Employees of the Business.

Take note of the Labour relations act which deals with the transfer of employee`s employment contracts from the seller to the buyer. Make use of specialists in the field of labour relations to avoid possible litigation.

Supplier`s and customer`s lists.

The seller must hand over a list of suppliers and customers (if applicable) to the buyer on the effective date.

Asset list.

A list of assets and equipment must form part of the Sales Agreement.

Debts and Liabilities of the business.

Great care must be taken that the buyer does not buy the sellers debts and liabilities. Your competent Business Broker and accountant will assist you in this regard.

Debtors and Creditors.

The decision on the debtors and creditors must be stipulated in the Sales Agreement. It is best to exclude same.

Finally.

Invest in utilizing specialists in your business. Remember the most dangerous person is one who does not know, that he does not know. You may phone us for free advice on the purchase of your licensed business.

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Frik Liebenberg of Frik Liebenberg Business advisory Services cc 99/05522/23 has been a Business Broker since 1997 and a Liquor License Consultant since 2002. Feel free to contact us for further information.
Frik Liebenberg

Frik Liebenberg Business Advisory Services cc 99/05522/23

082 556 8368
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