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If you are thinking of buying or selling a limited company, one of the first decision you have to make is to decide whether you want to sell or purchase the assets or the shares.
During the share sale of a company the new buyer takes ownership of the existing business and continues to run it with its contracts, employees and premises intact.
The buyer replaces the owners of the company as a shareholder and a director. As a result, there is no transfer of company assets and no third party involvement is necessary.
This also means that the buyer will take on the liabilities of the business, including company debt. As the level of risk for the buyer is greater in a share sale, when compared to an asset sale, the process and the documentation will be more in-depth. The contract will require more guarantees and tax covenants to cover the buyer against any liabilities the company might have.
Existing shareholders can transfer their shares with a stock transfer form. However, we advise our clients to consider a share transfer agreement which gives better protection to both the buyer and seller.
The comprehensive share transfer agreement can be prepared whilst due diligence is taking place and will cover the following areas:
Once the transaction is complete it will be registered at Companies House to recognise the new ownership.
If you're planning to sell shares in your company, here are some general steps you can follow:
Prepare the company for sale: This involves updating legal documentation, ensuring that financial records are up-to-date and accurate, and improving the overall financial performance of the company to make it more attractive to potential buyers.
Determine the value of the shares: This can involve getting a professional valuation or using industry benchmarks to estimate the value of the shares, taking into account factors such as the company's financial health, growth potential, and market trends.
Find potential buyers: You can use a broker or personal connections to find potential buyers who may be interested in purchasing shares in your company.
Negotiate the sale: Once you have identified potential buyers, you'll need to negotiate the sale price and terms of the sale, taking into account factors such as the current market value of the shares and any potential future earnings.
Complete due diligence: Before the sale can be finalised, the buyer will conduct due diligence to ensure that the company is in good financial and legal standing, and that there are no hidden liabilities or other issues that could impact the value of the shares.
Preparation of the legal paperwork: it is usual for there to be a share or business purchase agreement drafted. This is commonly negotiated between the parties and records the terms of the sale as well as the seller’s warranties and other key terms. There is often a number of other documents alongside the sale or business purchase agreement, such as a disclosure letter, as well as documents required to transfer the legal ownership of the business or shares.
Complete the sale: Once the buyer is satisfied with the due diligence, and the various sale documentation has been agreed you can transfer ownership of the shares and complete the sale.
It's important to seek legal and financial advice from our solicitors throughout the process to ensure that your legal rights and interests are protected.
Selling shares in a company is often the most efficient way to hand over control of a trading business. Rather than breaking up the undertaking and transferring individual assets, the buyer acquires the shares and steps into the shoes of the existing owners. Contracts, employees and licences usually remain in place, but careful planning is still essential because many agreements contain change of control provisions and certain regulators require prior consent. A well prepared sale process protects value, reduces risk and keeps momentum so that both sides can complete on agreed terms and timescales.
Whether you are an owner-manager, a corporate group or an investor, our corporate solicitors guide you through every stage of selling shares in a company, from early structuring and heads of terms to negotiation of the definitive documents and post-completion filings.
Our share sale & purchases solicitors focus on getting the deal done while protecting your position. We identify the legal issues that matter commercially, streamline due diligence, negotiate pragmatic warranties and indemnities, and design a price mechanism that fits your priorities. Where appropriate, we coordinate with your accountants and tax advisers to align legal drafting with tax outcomes and financing requirements. If timing is critical, we build a clear timetable, allocate workstreams across our corporate, employment, commercial property and regulatory teams, and maintain a single point of contact so you always know what is happening and why.
Preparation and heads of terms: Preparing a clean, accurate information set, agreeing a confidentiality agreement and signing clear heads of terms with any exclusivity period helps avoid misunderstandings and sets a framework for the transaction. Early review of the company’s constitution, shareholder agreement and any pre-emption rights will flag what approvals are needed to sell shares.
Due diligence: Buyers typically review corporate records, contracts, litigation, employment, pensions, property, data protection, IP and regulatory compliance. Sellers benefit from a vendor pack or data room that answers likely questions up front, reducing the risk of re-trades and accelerating the process.
Price and adjustments: Common mechanisms include a locked box (economic risk passing at a historic date with protections against leakage) or completion accounts (final price adjusted by working capital, cash and debt at completion). Earn-outs, deferred consideration, escrows and retentions can align interests and manage risk where appropriate.
Principal documents: The share purchase agreement sets the core terms, including warranties, indemnities and any tax covenant. A disclosure letter qualifies the warranties by reference to the data room and specific disclosures. Ancillary documents typically include board minutes, stock transfer forms, updated registers, resignations and service agreements for any continuing management.
Regulatory and third party consents: While share sales do not usually require assignment of contracts, many key agreements contain change of control provisions and lenders, landlords or regulators may need to consent ahead of completion. Early identification of these items avoids delays.
Completion and post-completion: On completion, consideration is paid, share transfers are effected, the register of members is updated and new share certificates issued. Stamp duty on share transfers is normally payable at 0.5% of the consideration (rounded up to the nearest £5) where the price exceeds £1,000, and must be dealt with promptly. Post-completion, statutory registers must be brought up to date, any changes to directors or the person with significant control must be filed, and Companies House records should reflect the new ownership.
Individuals selling shares may qualify for reliefs such as business asset disposal relief, which can reduce the capital gains tax rate if the conditions are met. Corporate sellers may benefit from the substantial shareholding exemption in appropriate cases. On most share transfers, stamp duty is payable by the buyer at 0.5% of the consideration, subject to applicable thresholds and exemptions. Tax outcomes depend on your circumstances and you should take specialist tax advice at the outset; we work seamlessly with your accountants to align the legal documents with the intended tax treatment.
Undisclosed liabilities, underperforming contracts, compliance gaps and IP ownership issues are recurring risks in share deals. We mitigate these through a targeted due diligence scope, robust warranties supported by clear disclosure, carefully tailored indemnities and appropriate limitations on liability. Where suitable, we explore warranty and indemnity insurance to de-risk the position for one or both parties. We also ensure restrictive covenants, confidentiality and non-solicitation protections are enforceable and proportionate, safeguarding the value of the business after completion.
Straightforward transactions often complete within six to twelve weeks from heads of terms, while more complex, regulated or multi-party deals can take longer. We build a realistic timetable around critical path items such as financing, third party consents and regulatory approvals. On costs, we offer clear scope definitions and, where the work is predictable, fixed or capped fees. For due diligence and negotiations that depend on emerging issues, we provide regular cost updates so there are no surprises.
In a share sale, the buyer acquires the company with all of its assets, contracts, employees and liabilities. In an asset sale, selected assets and contracts are transferred out, and employees may transfer under employment regulations. Share sales are often simpler operationally but require deeper diligence and more extensive warranties to address legacy liabilities.
Employees remain employed by the same company on the same terms because the employer does not change; only the ownership of the company changes. Consultation duties may still arise where there are post-completion changes proposed, and any share schemes or bonus arrangements should be reviewed and addressed in the documents.
Common examples include lender consents, landlord approvals where leases contain change of control restrictions, key customer or supplier consents, and regulatory notifications or approvals for businesses in regulated sectors. Identifying these items early keeps the transaction on track.
Parties often use a locked box mechanism with protections against value leakage from the box date to completion, or completion accounts to true up price to actual cash, debt and working capital. Retentions, escrows and earn-outs are also used to manage risk and align incentives.
The disclosure letter sets out general and specific disclosures that qualify the seller’s warranties. It is a key risk allocation document and must be prepared carefully, with supporting documents in the data room so the buyer can properly assess the position.
Yes. Minority share sales raise additional issues such as information rights, reserved matters, exit provisions and valuation protections. We ensure the shareholders’ agreement and articles reflect the agreed governance and exit arrangements.
The company must update its statutory registers, issue new share certificates and, where applicable, file changes to directors, secretaries and persons with significant control. Stamp duty on the stock transfer forms must be dealt with in the required timeframe.
Warranty and indemnity insurance can provide comfort where the seller’s liability is limited or where a clean exit is required. We negotiate policy terms alongside the share purchase agreement to ensure the coverage dovetails with the contractual risk allocation.
If you are considering selling shares in a company or buying a company through a share purchase, our corporate solicitors are ready to help. We will scope your transaction at the outset, highlight the key legal and commercial issues and guide you through to a smooth completion. Contact us today on 0161 696 6170 to speak to our specialist solicitors.
Stephensons provides the blend of deal experience, commercial judgement and responsiveness that share transactions demand. Your matter will be led by seasoned corporate solicitors who focus on closing the deal on the right terms, not on scoring points. We assemble a cross-disciplinary team covering corporate, employment, commercial property, intellectual property and regulatory issues so that matters are resolved quickly and consistently. We are regulated by the Solicitors Regulation Authority and maintain robust quality controls across every stage of a transaction. Our clients value our clear advice, proactive project management and transparent pricing, whether they are selling a family business, undertaking a management buyout or completing a strategic acquisition. With national reach and modern digital processes, we deliver the pace and reliability you need with the personal service you expect.
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