img-427-hero

Preparing for the sale of your business

Buying or selling a business can be a disheartening prospect and if you are in the position of having no previous experience of this, it can be an extremely daunting time.

There are two main ways in which a business can be sold:

  • An asset sale, in which all (or only some) of the assets and contracts of the business are transferred to the buyer, but the actual owner of the business does not change.
  • A share sale, in which the shares in the company that owns the business transfer to the buyer.

Once you have found a buyer for your business, you will then be required to appoint a solicitor in order for them to draw up the definitive sales and purchase contract. It is extremely important that you appoint a solicitor who specialises in corporate law, especially in the areas of buying and selling of businesses. Choosing the wrong solicitor can result in costing you time and a huge amount of money. Plus with the added detriment of unnecessary stress and also the difficulty of putting your sale/purchase in jeopardy. 

A good accountant can assist with tax and the preparation of financial information and analysis for the sale and subsequent due diligence following the agreement of a deal.

When the business is owned by an individual or partnership but not a limited company, an asset sale will need to be progressed. However, if the business is a limited company, the buyer and seller can choose whether to proceed with an asset or share sale. With an asset sale, the company will be the seller as opposed to a share sale, where the company itself is sold and the seller is the shareholder.

When considering the continuity of a business, as a share sale the business will continue in the same form and to the outside world, it may be viewed that nothing has changed. Although some contracts contain terms whereby the contract is terminated if there is a change to the ownership of the company.

With an asset sale, all existing contracts have to be transferred, often requiring the consent of the relevant customer or supplier. The reputation of the business can, of course, be affected by this.

With a share sale, all of the existing liabilities of the business will remain with the business. With an asset sale, all existing liabilities remain with the seller, in less, of course, the buyer decides to take these on.

When considering employees, an asset sale would mean that the employees transfer to the new employer. The Transfer of Undertakings (Protection of Employment) Regulations (often known as TUPE) meaning all existing contracts of employment of the seller is taken over by the buyer.

Stamp duty is paid at the rate of 0.5% of the purchase price for a share sale only. Stamp duty is not payable on most asset sales, although the most obvious type of asset where stamp duty is payable is on the transfer of land.    

Both parties will need a clear understanding of what is required in terms of what is being paid and what the payment terms are. A comprehensive contract which deals with the transaction is also required and here at Lamb & Holmes, we would be happy to advise on this.

For further information on the buying or selling of a business from a legal perspective, please visit https://www.lambandholmes.com/commercial-law-services/business-advice or alternatively please contact our Kettering office on 01536 513 195 or our Corby office on 01536 745 168 dependent on your location.

Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email

Articles you may have missed...

Equity Release

We all have different interests and ambitions in life, but it’s not always possible to pursue these as fully as we’d like if we have

Read More »
No more posts to show