Buyers and sellers should be aware that they will have specific obligations to inform employees about their plans and may need to consult with employees prior to completion of the sale. If so, the employees will automatically transfer to the buyer on their current terms of employment and the buyer becomes their employer. On a business sale the TUPE regulations are likely to apply. ![]() There is likely to be more disruption to the business than on a share sale and the buyer may need to build confidence with the customers and suppliers of the business to maintain existing trading relationships. Contracts, agreements, land and property and certain intellectual property rights will all need to be formally transferred. On a business sale the assets and contracts of the business being sold will all need to move across to the buyer and the consent of customers, suppliers, landlords, licensors and others is more likely to be required. It is important to identify any such contracts early in the process. Certain contracts (for example, financing contracts and other long-term agreements) may however require the other party’s consent when a change of ownership of the company is planned. From the outside, very little will appear to have changed and customers and suppliers will usually be happy to continue dealing with the company as before. Whilst the shareholders of the company will change, its assets (including its business contracts, agreements and licences) remain with the company. On a share sale only the ownership of the shares in the company is transferred. Generally speaking there are more practical and commercial issues to contend with on a business sale than on a share sale. One asset/liability which the buyer cannot leave behind so easily however is the target’s workforce – see employees and pensions below. If the buyer suspects there are unknown liabilities in the company or is troubled by any particular aspect of the business, it may prefer to structure the deal as a business sale - allowing it to “cherry-pick” from the company’s assets and liabilities and take on only those risks which it understands and finds acceptable. On a business sale only the assets and liabilities which the buyer specifically agrees to purchase are acquired and everything else stays with the company. Generally this route offers sellers a cleaner break as after the sale takes place they will have no direct responsibility for the company - any continuing liability will be that owed to the buyer under the terms of the warranties and indemnities agreed in the sale and purchase agreement. On a share sale the buyer acquires the company “warts and all” with all its assets, liabilities and obligations. Please contact us if you would like to discuss this further. As a general rule of thumb, however, where sellers are individuals they are likely to favour a share sale in order to avoid a potential double tax charge – an initial tax charge on the company at the time of the sale of assets to the buyer and a further tax charge on the company’s shareholders when they withdraw the sale proceeds from the company.Īs tax is likely to be a key determining factor to the structure of a deal, both buyers and sellers should obtain specialist tax advice at the outset. Their interests may well be at odds when it comes to achieving the most beneficial tax outcome.Īs this is a complex area, dependent on the specific circumstances of the parties (including the availability of exemptions, reliefs and allowances), this Guide does not cover the various tax consequences of a deal. The structure of a transaction is often driven by the tax implications for the buyer and sellers. See pre or post-completion restructuring. Sometimes it will be necessary to restructure the business or company before it is sold to allow it to be acquired in the most appropriate way. The majority of acquisitions are structured as share sales but a number of factors may impact on which structure is used, the most common are looked at briefly below. Here, the company is the seller and it will sell some or all of its assets to the buyer. ![]() By buying the assets of the company which comprise the business (a business or asset sale).Here, the sellers are the shareholders of the company and they will sell their shares in the company to the buyer. By buying the shares in the company that owns the business (a share sale).Should we buy/sell the shares or the assets of the company?Ī company’s business can be acquired in one of two ways: A glossary of common terms used in the context of private company sales and acquisitions can be found in the PDF version of this guide. This guide covers issues of interest to both buyers and sellers, including the structure of the deal, the process and the key documents involved.įor many of the individuals involved, a sale or acquisition is likely to be a one-off or rare event.
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