Share sale - buying or selling a company

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.

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Transferring shares

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:

  • The sale of shares transferring ownership of the company to the buyer
  • Guarantees based on information gathered during due diligence
  • Tax indemnity, including reimbursement of any outstanding taxation
  • Restrictive covenants

Once the transaction is complete it will be registered at Companies House to recognise the new ownership.

Our experienced corporate lawyers have a strong track record of successfully assisting both buyers and sellers with all aspects of share transactions. We will identify any areas of concern and advise on all aspects of the transaction. Stephensons will assist you in securing the outcome you desire. If you would like to speak with one of our experienced corporate lawyers please call us on 0203 816 9303.

 

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