How to Address Legal Liabilities Before Putting Your Business on the Market

Preparing your business for sale is more than just polishing up financials and packaging the pitch. One of the most overlooked—but critically important—steps in the process is identifying and resolving legal liabilities before going to market.

Buyers will conduct thorough due diligence. Any red flags—especially unresolved legal issues—can derail a deal, reduce your sale price, or put you in breach of warranty post-sale. If you’re serious about achieving a clean, high-value exit, you need to address your legal house early.

This article outlines the key legal liabilities UK business owners should review and resolve ahead of sale, with practical tips and expert insight from the team at EXITS.co.uk.

1. Review Contracts and Agreements

Start with a deep dive into all contractual obligations your business holds. Buyers will want reassurance that key contracts are:

• Up to date

• Properly executed

• Transferable

Key areas to check include:

• Customer and supplier agreements – Are they still valid? Can they be assigned?

• Employment contracts – Do they comply with current legislation? Are there restrictive covenants?

• Leases and property agreements – Are there any break clauses or change of control clauses?

• Loan agreements and finance obligations – Any personal guarantees?

Tip: Consider preparing a 'contract summary schedule' in advance of due diligence. It shows professionalism and helps you spot any deal blockers early.

2. Resolve Any Disputes or Litigation

Ongoing disputes—whether with customers, employees, suppliers, or HMRC—can kill buyer confidence. Before marketing your business:

• Resolve active legal claims wherever possible

• Disclose historic or ongoing issues transparently

• Get legal advice on how to ringfence any residual risks in the sale contract (e.g. through warranties or indemnities)

Even minor claims, if not handled correctly, can prompt price reductions or lengthy delays.

3. Check for Compliance Gaps

Regulatory non-compliance can lead to fines, penalties—or worse, criminal liability. Buyers want a business that’s compliant and future-proof. Make sure your business complies with:

• Health & safety laws

• GDPR and data protection

• Industry-specific regulations

• Insurance requirements

If your business holds licences, certifications, or accreditations, check they’re valid and transferable. Fix any lapsed documents or gaps in compliance now, not during a buyer's review.

4. Intellectual Property (IP): Ownership and Protection

A surprisingly common oversight. Do you own all your IP? Can you prove it? Check:

• Your brand name and logo are registered (if not, now is the time)

• Any software or creative assets are fully owned by the business (not a third-party contractor)

• Domain names and trademarks are in the right legal entity’s name

If IP is a core asset, make it legally watertight before you list the business.

5. Clarify Company Structure and Shareholder Issues

Ambiguity around share ownership, voting rights, or shareholder disputes will raise alarm bells for acquirers. Before sale:

• Ensure your cap table is accurate and up to date

• Resolve any director/shareholder disputes

• Clarify any outstanding share options, exit terms, or phantom share schemes

For companies with multiple shareholders, consider putting in place a pre-sale shareholder agreement to avoid future disagreements around valuation or sale terms.

6. Work with Legal and M&A Experts

Many business owners underestimate the legal complexity of a business sale—until it’s too late. At EXITS.co.uk, we help clients:

• Spot hidden liabilities before going to market

• Partner with the right legal advisers to fix issues

• Prepare a clean, ready-for-sale business that attracts strong buyers

When it comes to legal liabilities, the golden rule is simple: deal with them now, not during due diligence. Buyers pay more for clean businesses with minimal risk. Taking the time to clean up contracts, resolve disputes, and ensure compliance could add serious value to your final deal—and protect you from costly legal claims down the line.

Want a confidential assessment of your business before going to market? Speak to the expert team at EXITS.co.uk. Let’s see if we can help you unlock the full value of your exit.

Contact Us today!