Summary
Explains a shelf check for business records before an expected sale. Covers the 6 document groups (entity records, key contracts, employment and contractor records, licenses and permits, tax filings, insurance), the 3 questions asked of each record, a gap list, a hypothetical marine-parts distributor, a planning suggestion to consider starting 12 to 24 months ahead that is not a legal requirement, and what the check leaves out.
By: Jordan Gerheim, CEO – Outside Chief Legal LLC
When a buyer begins reviewing a business in Alabama, document requests can arrive quickly. An owner may know the company’s history, relationships, and obligations well, but that knowledge may not be fully reflected in its records.
A document check before an expected sale can help identify those gaps. This article calls that process a “shelf check,” but it includes both paper and electronic records.
As a planning suggestion, consider starting 12 to 24 months before an anticipated sale. That is not a legal requirement, and an owner can begin earlier or whenever a sale becomes a possibility. This article focuses on document organization from the seller’s perspective. It does not address valuation, pricing, or the tax treatment of a sale.
Quick answer: A shelf check organizes business records into 6 groups and asks 3 questions: Can the document be located? Is it the current version? Where signatures or approvals are needed, are they documented?
Missing records, outdated versions, and unresolved questions go on a gap list for follow-up. The check is a starting point for preparation, not a substitute for reviewing the documents or determining what a particular transaction requires.
What might a buyer request?
Consider this hypothetical example. It is not a specific client matter or a predicted outcome.
The owner of a marine-parts distribution company receives a written expression of interest from a buyer. The buyer’s adviser then requests entity records, key contracts, employment and contractor records, licenses and permits, tax filings, and insurance information.
The owner locates a supplier agreement with the company’s signature, but the copy does not show the supplier’s signature. Before deciding whether anything needs to be signed, the owner needs to determine whether a complete copy exists and whether further review is needed.
A shelf check gives the owner a way to identify that question before responding to the buyer.
Why do documents matter during a buyer’s review?
A buyer may use documents to evaluate information provided about the business. If the company leases its warehouse, the buyer may ask for the lease. If the business depends on a supplier relationship, the buyer may request the agreement and any amendments.
A missing or incomplete record can prompt additional questions. Organized records may help the owner respond more efficiently and identify issues that need professional review.
The goal is not simply to collect documents. It is to understand what is available, what remains uncertain, and what needs attention.
How does the shelf check work?
Start with the 6 document groups below. For each applicable record, check whether it can be located, whether the version is current, and whether any necessary signatures or approvals are documented.
“Current” means the record reflects applicable amendments, renewals, or other changes. It does not mean an older document should automatically be replaced.
For signatures and approvals, mark “not applicable” where appropriate. If the answer is uncertain, record the question rather than assume that a missing signature makes a document invalid.
Distinguish between a document that has not been located and one that was never created. Those situations may require different next steps.
What belongs in the 6 document groups?
Entity records
These records describe the business entity, its ownership, and its governance. Depending on the entity type, they may include formation documents, an operating agreement, bylaws, amendments, ownership records, and relevant approvals.
Check whether the records are complete and consistent with the company’s current ownership and structure. Note discrepancies for counsel to review, including questions about ownership, required approvals, or signing authority.
Key contracts
These are agreements the business relies on, such as customer and supplier contracts, leases, loans, and equipment-financing agreements.
Locate the complete agreement, including available signature pages, amendments, renewals, and related notices. Flag terms that may need review in connection with a sale, including assignment or change-of-control provisions.
If the way a relationship operates differs from the written agreement, note that difference. Do not assume the document should simply be rewritten to match current practice.
Employment and contractor records
This group covers records relating to employees and independent contractors. Depending on the relationship and the business, relevant documents may include offer letters, agreements, policies, handbooks, and acknowledgments.
Check whether applicable records can be located and whether later amendments or versions are available. Identify missing signatures or acknowledgments where they are needed, rather than assuming every person must have the same signed documents.
Questions about worker classification, existing commitments, or inconsistent practices should be flagged for review.
Licenses and permits
Gather the licenses and permits relevant to the business and its activities. These may include business licenses, professional or trade licenses, and local permits.
Check the listed holder, expiration date, renewal status, and person responsible for maintaining each record. Flag documents issued under a former name or associated with a different entity or individual.
Do not assume that a license or permit will remain effective after a sale. Any sale-related requirements should be confirmed for the particular license, agency, and transaction.
Tax filings
Locate copies of filed returns, related notices, and available filing confirmations for the periods under review.
For this check, the question is whether the records are available and whether missing items or filing-status questions have been identified. A tax adviser can help assess completeness and explain what the records show.
This article does not address the tax treatment of a sale. That requires separate advice based on the proposed transaction.
Insurance
Gather current policies, declarations pages, relevant endorsements, certificates, and available claims information.
Check policy periods and the named insured, and identify missing records or questions for the insurance adviser. Note any uncertainty about coverage or how a proposed sale could affect it.
How do you turn the answers into a gap list?
Create a short entry for each missing record or unresolved question. Include the document name, the issue, the next step, the person responsible, and a follow-up date.
| Group | Document | Located | Current | Signed | Next step |
|---|---|---|---|---|---|
| Entity records | Operating agreement | Yes | No, latest amendment not on file | Yes | Find the amendment and confirm it is signed |
For the hypothetical supplier agreement, an entry could read: “Supplier agreement: Copy located, but supplier signature is not shown. Request a complete copy from the supplier and ask counsel whether further action is needed.”
That entry identifies the issue without assuming that a new signature is the correct solution.
Some gaps may be resolved by locating an existing copy. Others may require an explanation, an updated record, or advice from counsel, a tax adviser, or an insurance professional.
Do not alter an existing signed document to make it appear complete or backdate a signature. Preserve the available record and document the question accurately.
Why consider starting 12 to 24 months ahead?
The suggested window allows time to locate records and address questions that depend on other people, such as a landlord, supplier, insurer, or former adviser.
It is a planning suggestion, not an Alabama rule or a guarantee that every issue can be resolved within that period. The appropriate timing depends on the business, its records, and the proposed sale.
If a sale is already under discussion, the check can still help organize what is available and identify questions that need attention.
What does the shelf check leave out?
These 6 groups are a starting framework, not a complete buyer-review checklist. A transaction may also require financial statements, asset and debt information, intellectual-property records, litigation information, or other materials.
The shelf check does not value the business, predict a purchase price, or determine what a buyer will accept. It also does not establish whether a document is legally sufficient.
Whether a gap matters depends on the records, the business, and the terms of the proposed transaction. Before sharing records, consider with counsel how confidential information should be handled.
Questions about preparing business records for a sale
When should an owner start?
This article suggests considering a shelf check 12 to 24 months before an expected sale. An owner can begin earlier or when a sale becomes a possibility. Starting sooner may provide more time to investigate missing records and obtain advice.
Does an owner need a lawyer to organize the records?
An owner or designated team member can begin locating documents and identifying apparent gaps. Questions about legal sufficiency, signatures, ownership, transfer restrictions, or corrective action should be referred to counsel.
What if a document cannot be found?
Mark it as “not located” and identify who may have a copy. That could be the other party, the person who prepared it, or an adviser who previously worked with the business.
If no copy can be located, ask counsel how to proceed rather than reconstructing it as though it were the original.
Discussing your shelf check
If you are considering selling a business in Alabama, book a Risk-Free Strategy Session with Outside Chief Legal to discuss your document preparation and questions identified during your shelf check.
General information only. This article is not legal or tax advice.
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