16 January 2015
Dear Sir/Madam, Can you please explain clause 31.4.1 of the Law Society standard form contract for sale of business and how the long service leave adjustment multiplier works? Do you adjust the accrued long service leave entitlement and an additional amount for the value of the corresponding percentage, or just the value of the percentage? If it is just the value of the percentage, what is the basis for the reasoning there is no adjustment for the total value of the accrued long service leave entitlements as at the date of completion? Thank you.
The vendor makes an allowance to the purchaser for the value of accrued long service leave multiplied by the percentage.
The rationale is:
As an aside, the purchaser also gets the immediate cash benefit (by adjusting the purchase price).
In our recently published 'uniform contract for sale of business', which you will find in your matter plan, we have allowed only for the tax effect and not for the fact the liability is contingent. The multiplier is 70%.
You may find our commentary on sale and purchase of business helpful.
Regards Mentor
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