How to avoid disputes when selling your hospitality business.

Selling your hospitality business is a highly complicated legal process, so the last thing you need is a dispute derailing the whole thing.

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Hospitality Sector Pressure Points | Dispute Resolution

Don't let disputes disrupt the sale of your hospitality business.

Our expert dispute resolution lawyers understand how to avoid costly and disruptive disputes.

Disputes regarding a company can take many forms, and unless resolved promptly, can delay or even derail the sale process. Disputes can be an unwelcome distraction and could be a concern for the buyer (especially if there are potential financial or reputational implications for the company and/or the buyer).

In the hospitality sector, common types of company dispute can include supplier/trade creditor disputes; customer disputes; shareholder disputes; employment disputes; landlord/lease disputes; licensing issues; and tax or financial disputes, etc.

Some practical way to ways to avoid/resolve such disputes, are as follows:

Documents create clarity. Make sure you have yours ready.

Make sure you have well-drafted documents already in place (such as supply contracts, terms of business, shareholder agreements, company documents, employment contracts, property documents, etc), setting out in clear terms the various rights and obligations. Avoiding ambiguity is often key.
Look over what you are selling.

Do your own due diligence on your company before the buyer does! Fix known issues early or be prepared to disclose them with proposed solutions.
Solve supplier and creditor issues

With supplier/trade creditor issues, make sure you keep clear records regarding supplies and payments; refer to your supplier contracts; and settle or formally dispute any supplier/trade creditor issues (with a view to resolving them ASAP).
Are there any outstanding issues with customers?

With customer issues, refer to your terms of business; or if there is say a personal injury element, keep up to date risk assessments and health & safety records, and notify insurers promptly of any threatened claims (with a view to resolving them ASAP).
Are shareholders all in agreement?

With shareholder issues, consult the shareholders agreement and company documents; seek to resolve disputes with professional assistance (if necessary) to avoid deadlocks; and consider a pre-sale buy out of dissenting parties (if possible) to clear the path for sale.
People are a resource. Are there underlying employment issues?

With employment issues, conduct an internal HR review and seek to resolve any grievances promptly; and consider the implications for employees in any sale process, making sure appropriate employment documents are in place (where necessary).
Bricks and mortar considerations

With property matters, regularly maintain the property and ensure any rent is up to date; get landlord consent (if needed) to any lease assignment or new lease terms; and obtain a schedule of condition to potentially limit dilapidation claims.
Licences and enforcement notices

With licensing issues, ensure all licences (such as premises licence, PRS for music, food hygiene rating, etc) are in good standing; address any recent enforcement notices; and get early legal advice on the transferability of licences.
Taxes and fiances

With tax/financial issues, get your accounts in order; seek to resolve any tax/financial issues promptly; and get an accountant to prepare a clean set of financials for sale.
Avoid court, use ADR

Whilst parties to a dispute may assert various legal claims against the other, issuing court proceedings is rarely a cheap or quick solution. Instead, early on, the parties might usefully explore settlement via Alternative Dispute Resolution (“ADR”) – such as without prejudice settlement offers, a round-table meeting, or mediation – as quicker and cheaper alternatives to issuing court proceedings.

Where disputes are unavoidable or persist, they might be dealt with in a well-drafted sale agreement (to deal with potential liabilities, cover unresolved issues, and/or help limit post-sale disputes). Further or alternatively, insurance might be used to cover specific risks.

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If you do become involved in a dispute, seeking early legal advice is also important, so that you understand your legal position and the options available to you from the outset. Resolving a dispute as quickly and cost-effectively as possible is key to avoiding disruption to any sale process.