Key differences between selling a company's shares and selling its business and assets
There are two principal ways in which you can sell your business:
you can sell your A private company limited by shares incorporated and registered in England and Wales. , which owns your business, through a sale by your A private company limited by shares incorporated and registered in England and Wales. 's In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company. of their Shares in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. (see Q&A 2 and following for what is involved in a A share in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. sale); or
your A private company limited by shares incorporated and registered in England and Wales. as owner can sell your business and assets (see Q&A 12 and following for what is involved here).
This is because your A private company limited by shares incorporated and registered in England and Wales. is a legal person distinct from the business it runs. There is a separation between:
the ownership of your A private company limited by shares incorporated and registered in England and Wales. , which is in the hands of your A private company limited by shares incorporated and registered in England and Wales. 's In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company.; and
the ownership of your business and assets and responsibility for your business's liabilities, which is primarily in the hands of your A private company limited by shares incorporated and registered in England and Wales. .
A sale of your business and assets typically involves your A private company limited by shares incorporated and registered in England and Wales. (not your A private company limited by shares incorporated and registered in England and Wales. 's In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company.) selling to a buyer:
the The additional value a business has from its reputation, brand recognition, future growth and connections. It is essentially the value of the probability its customers will return. of your business, so that the buyer and not your A private company limited by shares incorporated and registered in England and Wales. has the right to run the business; and
specific assets which are identified in the sale agreement,
with the buyer agreeing to take on liabilities which are also identified in the sale agreement.
The buyer will pay the purchase price to your A private company limited by shares incorporated and registered in England and Wales. and not to your A private company limited by shares incorporated and registered in England and Wales. 's In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company., as it is the A private company limited by shares incorporated and registered in England and Wales. which owns the business and assets and not your In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company..
A sale of your business and assets is achieved by your A private company limited by shares incorporated and registered in England and Wales. (not your A private company limited by shares incorporated and registered in England and Wales. 's In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company.) and the buyer signing a sale agreement, which will determine precisely what is sold and how.
In order to sell your A private company limited by shares incorporated and registered in England and Wales. 's business and assets, you will need to agree with the buyer and define carefully in the sale documents:
exactly which assets and liabilities the buyer will take over as part of the sale, and which assets and liabilities will be excluded from the sale;
what formalities will be needed to sell particular assets such as a lease or A product of human creativity such as copyrights, trademarks, patents and designs.;
what consents will be required from suppliers or customers (such as your bank or important customers) as a condition to the sale going ahead, and how to plan for these; and
what process to follow in order to deal with those Individuals hired personally to work under contracts of employment, usually in exchange for payment. Employees are normally fully integrated into the business and the employer exercises a large degree of control over their work. who will transfer across with the business.
A business and assets sale is not generally speaking advantageous for your A private company limited by shares incorporated and registered in England and Wales. 's owners (In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company.).
If your A private company limited by shares incorporated and registered in England and Wales. runs more than one business and you are only selling one business to the buyer, or if the buyer refuses to buy in any other way, you may have no choice.
However, your In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company. will not benefit from any tax reliefs which may be available to them on a A share in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. sale and they are likely to pay tax if your A private company limited by shares incorporated and registered in England and Wales. makes any payment to them out of the sale proceeds (in addition to any tax your A private company limited by shares incorporated and registered in England and Wales. will have to pay) (see Q&A 28 for more detail). They will also have to deal with legal formalities not required for a A share in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. sale (see Q&A 13 and Q&A 15).
A business and assets sale, like a A share in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. sale, can be both time-consuming and expensive and there is no (1) In the context of debt, a contract where someone agrees to pay if the debtor cannot pay themselves. (2) In the context of sale of goods, a promise to a customer which is given freely (without charging extra money) that the goods they are buying will meet certain standards, and if they do not the person making the promise will do something to make up for that (eg give a refund, or repair or replace the goods). that negotiations with a potential buyer will result in a sale. If a buyer does pull out before a sale goes ahead, there is usually nothing you can do.
See Q&A 17 for information on the time it will take and Q&A 18 and Q&A 19 for guidance on the cost.
Both a A share in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. sale and business and assets sale will invariably involve the negotiation and signing of lengthy sale documents. However, the strict formalities required for a business and assets sale are more complex due to the legal position that:
no assets will be sold unless defined clearly in the sale agreement and unless, where applicable, specific formalities are observed to be able to transfer certain categories of asset such as real estate and A product of human creativity such as copyrights, trademarks, patents and designs.;
as between your A private company limited by shares incorporated and registered in England and Wales. and the buyer, the buyer will only be responsible for those liabilities of the A private company limited by shares incorporated and registered in England and Wales. which are spelt out in the sale agreement;
even if the buyer has agreed with your A private company limited by shares incorporated and registered in England and Wales. to be responsible for a liability owed to a A person who is not directly involved in an existing relationship, transaction or dispute; for example, someone who is not a named party in a contract., as between your A private company limited by shares incorporated and registered in England and Wales. and the A person who is not directly involved in an existing relationship, transaction or dispute; for example, someone who is not a named party in a contract. your A private company limited by shares incorporated and registered in England and Wales. will remain on the hook unless the A person who is not directly involved in an existing relationship, transaction or dispute; for example, someone who is not a named party in a contract. agrees otherwise;
consents will be needed from parties to your business contracts (what are known as novations) for your A private company limited by shares incorporated and registered in England and Wales. to be fully relieved from its contractual commitments and for the buyer to know that key contracts have been transferred to it intact; and
Individuals hired personally to work under contracts of employment, usually in exchange for payment. Employees are normally fully integrated into the business and the employer exercises a large degree of control over their work. in the business will automatically transfer to the buyer with the business and these Individuals hired personally to work under contracts of employment, usually in exchange for payment. Employees are normally fully integrated into the business and the employer exercises a large degree of control over their work. must be informed and consulted before the sale (see Q&A 21).
If your A private company limited by shares incorporated and registered in England and Wales. 's business and assets are to be sold, and not Shares in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. , it will probably be due to the buyer's insistence.
Most of the issues which a buyer will have to face will be due to the nature of what is being acquired from your A private company limited by shares incorporated and registered in England and Wales. . See Q&A 15 for the formalities involved in selling a business and assets.
Examples of issues which a buyer may typically have to deal with are if:
the buyer wants to be sure that a key supplier or customer will be fully on A collective name for the directors of a company. The board is usually the primary day-to-day decision-making body of a company.but either the supplier or customer is not prepared to commit itself, or for reasons of confidentiality you do not wish to make any approach before the sale; or
there are issues obtaining consent for a key contract such as from your landlord under the office lease.
You can expect the process involved in selling your A private company limited by shares incorporated and registered in England and Wales. 's business and assets to be time-consuming in terms of:
the steps you should take to prepare for a sale (see Preparing a business for sale);
the formalities required (see Q&A 15);
the buyer's A detailed investigation of a business, or aspects of a business, relevant to negotiations between parties, which is carried out by one or more parties to the discussions before legally committing themselves to a transaction or contracton your business
; and the legal process of agreeing the sale documents
.
It could be anything up to a year (sometimes longer) from when you first start discussions with a buyer until the sale completes.
As with any sale process, for example selling your house, there is no (1) In the context of debt, a contract where someone agrees to pay if the debtor cannot pay themselves. (2) In the context of sale of goods, a promise to a customer which is given freely (without charging extra money) that the goods they are buying will meet certain standards, and if they do not the person making the promise will do something to make up for that (eg give a refund, or repair or replace the goods). that negotiations with a potential buyer will result in a sale.
The two main costs to pay on a business and assets sale are tax and advisers' fees.
Your A private company limited by shares incorporated and registered in England and Wales. will be liable to pay Tax payable on profits made from doing business as a limited company. on any gain it makes on a sale of its business and assets. See Q&A 19 for more guidance on this.
A sale process could be expensive in terms of advisers' fees as you will need to instruct lawyers and tax advisers and maybe also other advisers. These costs can be factored into the sale price you negotiate but you will need to pay them whether or not the sale goes ahead. (See Preparing a business for sale for guidance on instructing advisers.) For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.
Your A private company limited by shares incorporated and registered in England and Wales. 's In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company. should not have to pay tax solely as a result of your A private company limited by shares incorporated and registered in England and Wales. selling your business and assets, if they do not benefit personally. However, your A private company limited by shares incorporated and registered in England and Wales. may be liable to pay Tax payable on profits made from doing business as a limited company. on any gain it makes on the sale and your A private company limited by shares incorporated and registered in England and Wales. 's owners may be liable to pay tax if any payments are made to them out of the sale proceeds.
There is therefore a risk of the purchase price being taxed twice, once in the hands of your A private company limited by shares incorporated and registered in England and Wales. and a second time when payments are made to your In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company.. This is not the case when Shares in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. are sold (see Q&A 28).
Tax is outside the scope of this service. You should get advice from a suitably qualified tax expert at an early stage of preparing for a sale of your business and assets.
You will need to obtain the following consents to be able to sell your business and assets, and transfer responsibility for your business liabilities:
from your board, to start the sale process and to approve the sale documents;
from one or more In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company., if required under your A private company limited by shares incorporated and registered in England and Wales. 's The main rules on how a company is run. The articles include rules on the division of powers between directors and shareholders, the composition and operation of the board of directors and how directors’ and shareholders’ meetings are held.or, if there is one in place, An agreement entered into between the shareholders of a company which regulates the relationship between the shareholders and governs how the company is run.;
from parties to your business contracts (what are known as novations) for your A private company limited by shares incorporated and registered in England and Wales. to be fully relieved from its contractual commitments and for the buyer to know that key contracts have been transferred to it intact; and
in order to discharge your A private company limited by shares incorporated and registered in England and Wales. from its business liabilities, from those to whom the liabilities are owed.
You will also need to inform and consult with Individuals hired personally to work under contracts of employment, usually in exchange for payment. Employees are normally fully integrated into the business and the employer exercises a large degree of control over their work. before any sale (see Q&A 21).
If your A private company limited by shares incorporated and registered in England and Wales. sells its business and assets as a A business which is running well enough to stay afloat for at least 12 months., United Kingdom of Great Britain and Northern Ireland Laws made by the government, usually in the form of Acts of Parliament and regulations.:
requires that Individuals hired personally to work under contracts of employment, usually in exchange for payment. Employees are normally fully integrated into the business and the employer exercises a large degree of control over their work. and their representatives are informed of and consulted about the sale before it happens, and provides for sanctions if not complied with;
provides that Individuals hired personally to work under contracts of employment, usually in exchange for payment. Employees are normally fully integrated into the business and the employer exercises a large degree of control over their work. are automatically transferred from the A private company limited by shares incorporated and registered in England and Wales. to the buyer at the same time as the sale happens; and
treats Individuals hired personally to work under contracts of employment, usually in exchange for payment. Employees are normally fully integrated into the business and the employer exercises a large degree of control over their work. who are sacked in connection with the sale as When an employee is dismissed without good reason or without following the proper procedure. (with exceptions).
A A buy-out is a form of share sale to a buyer often led by or with backing from a professional investor such as a venture capital or private equity fund. A buy-out offers some of your company's owners an opportunity to sell their shares and allows others, who may for example be part of management and who do not want to sell, to continue as shareholders. At the same time, employees who are not currently shareholders may have the opportunity to invest in shares going forwards. is a form of A share in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. sale. It is not covered in any detail in this section but is a way in which you can sell a part of your business.
It can take a number of different forms but commonly involves the sale of some of your A private company limited by shares incorporated and registered in England and Wales. 's existing Shares in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. , with the buyer often backed by a professional investor such as a Venture capital is a form of investment for businesses which are generally at an early stage and/or with strong growth potential. Venture capital provides finance sectors across the board and is particularly strong in technology-based sectors such as ICT, life sciences and fintech. Private equity is typically a source of finance for businesses which are a lot more developed and mature than those in which venture capital invests. or Private equity is typically medium to long-term finance provided to mature companies which have the potential for strong growth, the finance being provided in return for shareholdings in the companies. Venture capital generally provides finance for businesses which are at too early a stage for private equity to invest. Private equity finance commonly backs acquisitions of businesses either led by management (management buy-outs) or in which the private equity investor installs its own management team (management buy-ins). fund.
A A buy-out is a form of share sale to a buyer often led by or with backing from a professional investor such as a venture capital or private equity fund. A buy-out offers some of your company's owners an opportunity to sell their shares and allows others, who may for example be part of management and who do not want to sell, to continue as shareholders. At the same time, employees who are not currently shareholders may have the opportunity to invest in shares going forwards. offers some of your A private company limited by shares incorporated and registered in England and Wales. 's owners an opportunity to sell their Shares in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. and allows others, who may for example be part of management and who do not want to sell, to continue as In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company.. At the same time, managers who are not currently In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company. may be able to invest in Shares in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. going forwards, particularly if the sale is backed by a professional investor.
The way professional investors structure Buy-outs are forms of share sale to buyers who are often led by or have backing from a professional investor such as a venture capital or private equity fund. A buy-out offers some of your company's owners an opportunity to sell their shares and allows others, who may for example be part of management and who do not want to sell, to continue as shareholders. At the same time, employees who are not currently shareholders may have the opportunity to invest in shares going forwards. is likely to add to the duration and cost of the sale process.
See
Another way to sell your A private company limited by shares incorporated and registered in England and Wales. 's business is through an initial public offering, or In relation to intellectual property, the IPO is the Intellectual Property Office: the governmental department in charge of intellectual property matters. In relation to company shares, IPO stands for Initial Public Offering: the first time that a company's shares are admitted to listing on a regulated public market (such as the main market of the London Stock Exchange) or admitted to trading on another type of public market (such as AIM)., of your A private company limited by shares incorporated and registered in England and Wales. 's Shares in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. . It is not covered in any detail in this section.
In brief, the United Kingdom of Great Britain and Northern Ireland an In relation to intellectual property, the IPO is the Intellectual Property Office: the governmental department in charge of intellectual property matters. In relation to company shares, IPO stands for Initial Public Offering: the first time that a company's shares are admitted to listing on a regulated public market (such as the main market of the London Stock Exchange) or admitted to trading on another type of public market (such as AIM). can be done by admitting your A private company limited by shares incorporated and registered in England and Wales. 's Shares in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. to Alternative Investment Market, a sub-market on the London Stock Exchange for growing companies or listing them on the The Main Market of the London Stock Exchange of the London Stock Exchange (London Stock Exchange). Alternative Investment Market, a sub-market on the London Stock Exchange for growing companies is the London Stock Exchange's international market for smaller growing Private companies limited by shares incorporated and registered in England and Wales. and so is more likely to be relevant to you if an In relation to intellectual property, the IPO is the Intellectual Property Office: the governmental department in charge of intellectual property matters. In relation to company shares, IPO stands for Initial Public Offering: the first time that a company's shares are admitted to listing on a regulated public market (such as the main market of the London Stock Exchange) or admitted to trading on another type of public market (such as AIM). is the sale route you wish to pursue.
You need to be aware of some of the requirements which are specific to an In relation to intellectual property, the IPO is the Intellectual Property Office: the governmental department in charge of intellectual property matters. In relation to company shares, IPO stands for Initial Public Offering: the first time that a company's shares are admitted to listing on a regulated public market (such as the main market of the London Stock Exchange) or admitted to trading on another type of public market (such as AIM).. They include:
your A private company limited by shares incorporated and registered in England and Wales. and In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company. will need to satisfy numerous conditions before the In relation to intellectual property, the IPO is the Intellectual Property Office: the governmental department in charge of intellectual property matters. In relation to company shares, IPO stands for Initial Public Offering: the first time that a company's shares are admitted to listing on a regulated public market (such as the main market of the London Stock Exchange) or admitted to trading on another type of public market (such as AIM). can go ahead;
a broker or (in the case of Alternative Investment Market, a sub-market on the London Stock Exchange for growing companies) a A corporate finance adviser approved to act for companies seeking admission to AIM will need to be appointed along with legal, accounting and other advisers;
your A private company limited by shares incorporated and registered in England and Wales. will need to convert from a A company which is not a public limited company and whose constitution states that the liability of its shareholders is limited to the amount, if any, unpaid on their shares. The vast majority of SMEs will be private companies and not public companies. There are a number of differences between private and public companies, including the ability of a public company, but not a private company, to offer its shares to the public and the requirement for a public company, but not a private company, to have a minimum amount of share capital. to a A company limited by shares whose certificate of incorporation states that it is a public company, in relation to which the statutory registration requirements have been complied with and whose constitution states that its members' liability will be limited to the amount, if any, unpaid on their shares. The vast majority of SMEs will be private companies and not public companies. There are a number of differences between public and private companies, principally the ability of a public company, but not a private company, to offer its shares to the public and the requirement for a public company to have a minimum amount of share capital. and will be subject to additional legal requirements;
your A private company limited by shares incorporated and registered in England and Wales. will need to approve or sign up to various public documents; and
your A private company limited by shares incorporated and registered in England and Wales. 's In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company. will not be able to sell their Shares in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. for a period after the In relation to intellectual property, the IPO is the Intellectual Property Office: the governmental department in charge of intellectual property matters. In relation to company shares, IPO stands for Initial Public Offering: the first time that a company's shares are admitted to listing on a regulated public market (such as the main market of the London Stock Exchange) or admitted to trading on another type of public market (such as AIM). (referred to as lock-ins).