Pub. 7 2017 Issue 1

9 parties, such as computer equipment and software maintenance contracts, agreements for uniforms, advertising contracts, etc. It is important for these agreements to be reviewed by counsel and identified early on so the parties can determine how they are to be handled, whether they will be assumed by the buyer, and what third party consents are required for them to be assigned. In some instances, there are certain reasons why the parties might use a letter of intent. While ordinarily, the letter of intent is not a substitute for the formal buy-sell agreement required by the manufacturer to start the approval process, the letter of intent itself might give rise to an argument that it is a bind- ing contract, creating legal obligations of the parties. The best course in the circumstance of a letter of intent, as with any written document, is to first consult with an attorney before it is signed. The parties should also evaluate the necessity of and perform any and all due diligence, including inspections of the business and assets and any real estate and improvements, as well as who will bear inspection performance costs and the consequences of inspection findings that are not satisfactory. Early determi- nation of these issues could facilitate avoidance of delay, maximize the poten- tial for manufacturer approval, keep the transaction intact, and allow a party to determine whether to proceed to clos- ing. In a related way, it is also important to keep counsel informed throughout the process. Parties who attempt to handle certain aspects of a proposed transaction themselves, including the manufacturer application process, with- out the benefit of counsel’s prior review of proposed submissions can create po- tential problems for themselves. Furthermore, the structure of the selling dealership is often a corpora- tion or other legal entity. Though the buyer may have been dealing with the seller’s majority owner all along, minor- ity shareholders may have rights under the law and the corporation’s governing documents which can impact the buy- sell process. It is important to deter- mine early in the process the rights, if any, of minority shareholders to avoid unnecessary delay and secure required approvals. The time for bringing in competent automotive counsel is at the very be- ginning – before considering the sale or purchase of a dealership – because there are legal, tax, planning, and other considerations that go into structur- ing the transaction in order to protect the parties’ interests. Prospective sell- ers and buyers alike should engage in buy-sell negotiations with the benefit of counsel to avoid pitfalls that could adversely result in the undoing of the transaction or otherwise adversely im- pact the parties.  Julie A. Cardosi is Principal of the private firm, Law O ice of Julie A. Cardosi, P.C., of Springfield, Illinois. She has practiced law for over 30 years, and represents the unique business interests of franchised motor vehicle dealers throughout Illinois. Formerly the first in-house staff legal counsel for the Illinois Automobile Dealers Association, she concentrates her practice in the areas of dealership ownership transfers (asset purchases and stock purchases), mergers and acquisitions, franchise law and related issues, corporate law, commercial real estate transfers, government regulation, advertising, and other issues impacting day-to-day dealership operations. She is also a former Illinois Assistant Attorney General and Deputy Chief of the Consumer Fraud Bureau of the Attorney General’s O ice. The information contained in this material is not intended to be considered legal advice and should not be acted upon as such. Because of the generality of this material, the information providedmay not be applicable in all situations and should not be acted upon without legal advice based on the specific factual circumstances.