Legal Issues to Consider When Buying a Business with a Website
Because websites are a vital part of many businesses, if you are buying a business you need to perform a due diligence on the website.
Aspects to consider:
- Domain ownership – don’t assume that the domain associated with the website is owned by the seller, whether a corporate entity or individual. In many cases that’s not accurate as the domain may have been bought when the business was started in a different individual’s name. A trademark conflict search would also be beneficial.
- Website design and content – who owns this? It may be the seller but it could also be owned, in whole or in part by the web developers/designers if rights were not specifically assigned at the time it was created.
- Double check – whether the seller provides you with access and data or not, ensure an expert cross checks what the seller says or provides – an online marketing expert can offer help as to whether the seller is being upfront and honest.
- Legal compliance with online trading laws – does the website currently comply with online trading laws such as the Electronic Communications and Transactions Act, Consumer Protection Act and Protection of Personal Information Act? If not, you would be taking on a big risk, and at the very least would need to ensure this is corrected and to obtain an indemnity from the seller.
- Warranties – as with buying any business, consider what warranties should be sought from the seller.
- Website security/back up/hosting/site speed/ranking factors – all of these factors are vital – websites do get hacked, so security is important and site speed is also a ranking factor with google, so these issues need to be considered and checked.
- If e-commerce enabled, where are clients from – enforcement issues internationally? – with an e-commerce site, consider where the buyers come from – what happens if there are problems or disputes? International law is complex and a site which gets most of its business internationally would be considered higher risk.
- Goodwill – google the website you are interested in buying. Be aware that any adverse comments or reviews may damage the business and are very difficult to remove. Goodwill is notoriously difficult to value.
If you are buying or selling a business which includes one or more websites or are buying or selling a website on a standalone basis, specialist advice is important. Please do contact us should you require assistance.