Hire and Rental News - November 2018

18 HIRE AND RENTAL NEWS • NOVEMBER 2018 INDUSTRY in FOCUS lternatively, you could take over an existing hire business. This could be done in one of two ways: • acquiring the assets of a hire business and taking over its existing operations; or • acquiring the shares in a company which operates a hire business. There are different legal and tax considerations in both approaches. You should seek professional advice about which approach is ideal for you. Buying assets (as opposed to buying shares) will normally mean more work in transferring those assets, as discussed below. On the other hand, buying shares means the risk of inheriting the liabilities of the company being bought. In this article, we explore the top five issues to consider when taking over an existing hire business by way of an asset purchase. 1. Ownership of Assets Does the seller of the business own the equipment which it is hiring out to its customers? If so, these will need to be transferred to you at completion of the sale. If the seller does not own the equipment, but is leasing it from a third party, then you will need to ensure those leases are transferred to you. Alternatively, you could negotiate new leases for the equipment and ensure the seller pays out the finance. You should also consider what other valuable assets the business has, which you need to operate the business, such as customer databases and other intellectual property. Before settlement, you should search the Personal Property Securities (PPS) Register to determine if there are any security interests registered against the seller. If there are any PPS interests registered, these interests should be released before settlement. If you do not do this, you may find someone else has an interest in the equipment you are buying and could take it away from you, even if you have paid full value for it. 2. Customer Contracts Has the business got existing contracts with customers for equipment hire? If so, these contracts will need to be transferred to you at completion of the sale. If you fail to do so, you may not be entitled to the hire fees payable by the existing customers who have currently hired equipment from the business. You may also want to review the business's standard terms and conditions for hire. Generally, terms and conditions should not contain any unfair terms because you will be unable to rely on them and may become liable for compensation. The terms of business of the seller may lean on whether you need the customer’s permission to transfer. Additionally, you may wish to ensure you are adequately protected in respect of PPS. Once you take over the business, you must register any PPS interests you have against customers where the hire is for more than 24 months. For hires that started before 20 May 2017 more onerous provisions apply. 3. Physical presence Does the hire business operate from a physical premises? And if so, do you wish to continue using it? If the seller owns the premises, but does not want to sell you the property, you should negotiate and enter into a formal Top five issues to consider when buying a hire business By Oliver Shtein, Eric Kwan and Priti Joshi – Bartier Perry There are several ways to make inroads into the equipment hire and rental business. For example, you could buy the equipment to be hired out, commence marketing activities to attract a customer base and build the business from the ground up.