Strictly speaking, all you need to sell your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. is for your shareholdersIn 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. to sign stock transfer forms and deliver them to the buyer with their share certificatesCertificates which shareholders in a company are entitled to receive evidencing ownership of the shares they hold. (or an indemnityAn agreement that one party will compensate another on the occurrence of a specified event. for any lost share certificateA certificate which a shareholder in a company is entitled to receive evidencing ownership of the shares they hold. ). All underlying assets and liabilities will automatically pass with the sharesShares 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 the buyer.

However, in practice almost all potential buyers will not agree to buy your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. without going through both:

1. comprehensive due diligence on your business; and

2. negotiation of detailed sale documents with the sellers to provide contractual protection.

The possible benefits to your companyA private company limited by shares incorporated and registered in England and Wales. 's shareholdersIn 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. in selling their sharesShares 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. include:

1. receiving the sale price from the buyer, which will hopefully provide them with a profitable return on their investment (see Q&A 27);

2. tax reliefs which may be available on the sale price, such as entrepreneur's reliefTax relief which, if available to a selling shareholder, may reduce or delay the capital gains tax otherwise payable by that shareholder and SEISThe Seed Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS. or EISThe Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS. (see Q&A 9); and

3. a 'clean break' in that after the sale they will cease to have an interest in the business (although they may have ongoing liabilities under the sale documents) (see Q&A 30).

A shareA 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 for your companyA private company limited by shares incorporated and registered in England and Wales. 's owners and there is no guarantee(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 pulls out before a sale goes ahead, there is usually nothing you can do.

See Q&A 7 for information on how long it will take and Q&A 8 and Q&A 9 for guidance on the cost.

You will need consents before a shareA 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 happen; see Q&A 10 for guidance.

The main issue which will be faced by someone who is looking into buying a companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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 the principal reason for the time and cost which both sellers and buyer will incur on a shareA 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, is the risks a buyer will assume if it becomes the owner.

As new owner of your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. , a buyer will automatically take over responsibility for your companyA private company limited by shares incorporated and registered in England and Wales. 's business, assets and liabilities. Generally speaking, the buyer will take over your business risks without recourse to your selling shareholdersIn 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. unless it has contractual protection.

This explains the two principal parts of the process of selling sharesShares 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. once the price has been agreed:

1. the due diligence 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 contracta possible buyer will carry out before committing themselves to buy, to make sure they know as much as they want to know on your companyA private company limited by shares incorporated and registered in England and Wales. 's liabilities, risks and opportunities (and if they do not like what they see, giving them the opportunity to pull out of the sale); and

2. the legal process of negotiating the sale documents with your companyA private company limited by shares incorporated and registered in England and Wales. 's owners so that the buyer will have contractual protection to guard against unexpected liabilities (and again, if the buyer does not get the protection they want, giving them the opportunity to pull out of the sale before signing anything).

One of the main reasons why a sale may take the form of your companyA private company limited by shares incorporated and registered in England and Wales. selling its business and assets, and not a sale of sharesShares 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. , is if the buyer is not prepared to take on some or all of your companyA private company limited by shares incorporated and registered in England and Wales. 's liabilities; see Q&A 15 for more guidance on this.

You can expect the process involved in selling your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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 be time-consuming in terms of the steps you should take to prepare for a sale, the buyer's due diligence 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. See Preparing a business for sale for more guidance.

As with any other sale process, such as selling your house, there is no guarantee(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 shareA 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 are:

1. tax; and

2. advisers' fees.

Your companyA private company limited by shares incorporated and registered in England and Wales. 's owners will generally be liable to pay capital gains taxCGT: A tax on the profit when certain assets are sold (or disposed of) that have increased in value. It is the gain in value an individual has made that is taxed, not the actual amount of money received. on any gain they make on a sale of their sharesShares 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 9 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 others too. These costs can be factored into the sale price you negotiate but you will probably need to pay your advisers 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.

If you or other shareholdersIn 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. sell sharesShares 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. in your companyA private company limited by shares incorporated and registered in England and Wales. for a price which is more than you paid, there is a good chance you will need to pay capital gains taxCGT: A tax on the profit when certain assets are sold (or disposed of) that have increased in value. It is the gain in value an individual has made that is taxed, not the actual amount of money received. (CGTCapital Gains Tax: A tax on the profit when certain assets are sold (or disposed of) that have increased in value. It is the gain in value an individual has made that is taxed, not the amount of money received.) on your gain.

You may be able to reduce or delay the amount of CGTCapital Gains Tax: A tax on the profit when certain assets are sold (or disposed of) that have increased in value. It is the gain in value an individual has made that is taxed, not the amount of money received. you need to pay on a sale of your sharesShares 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. if you are eligible for tax relief – for example, if any selling shareholderIn relation to a company limited by shares, means a person whose name has been entered in the register of members of that company as a shareholder in that company. qualifies for entrepreneur's reliefTax relief which, if available to a selling shareholder, may reduce or delay the capital gains tax otherwise payable by that shareholder, or if the sharesShares 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. sold qualify for SEISThe Seed Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS. or EISThe Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS. relief (see Preparing a business to raise money for guidance on SEISThe Seed Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS. and EISThe Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS.).

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 companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. .

You will need to obtain consents before a shareA 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 happen, including from:

1. your board before you start the sale process, in advance of signing the sale agreements and to approve the transfer of sharesThe process used to change the legal ownership of shares, where the shares are sold or given as a gift. to the buyer;

2. each shareholderIn relation to a company limited by shares, means a person whose name has been entered in the register of members of that company as a shareholder in that company., which may be an issue if not all shareholdersIn 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. are in agreement;

3. one or more shareholdersIn 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 companyA private company limited by shares incorporated and registered in England and Wales. 's articlesAlso referred to as articles of association, a company’s articles are the main body of rules which govern how the company regulates its internal affairs (subject to certain overriding legal requirements). Important matters addressed in the articles include the division of powers between directors and shareholders, the composition and operation of the board of directors, matters relating to the holding and conduct of directors’ and shareholders’ meetings, and provisions relating to the transfer of shares. of association or, if there is one in place, shareholders' agreementAn agreement entered into between the shareholders of a company which regulates the relationship between the shareholders and governs how the company is run.;

4. parties to commercial agreements entered into by your companyA private company limited by shares incorporated and registered in England and Wales. such as a supply agreement or property lease if, for example, the other parties have a right to terminate on a change of ownership (a 'change of control' provision); and

5. your bank if required (which is likely) under the terms of your banking arrangements.

See Preparing a business for sale for more detailed information on the consents you will need.

If your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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, your employeesIndividuals 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. will remain employed by the companyA private company limited by shares incorporated and registered in England and Wales. and so their employment will not be affected. The employment legislationLaws made by the government, usually in the form of Acts of Parliament and regulations. which applies on a business and assets sale (see Q&A 21) does not usually apply on a shareA 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.

A sale of your business and assets is achieved by your companyA private company limited by shares incorporated and registered in England and Wales. (not your companyA private company limited by shares incorporated and registered in England and Wales. 's shareholdersIn 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 companyA 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:

1. 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;

2. what formalities will be needed to sell particular assets such as a lease or intellectual propertyA product of human creativity such as copyrights, trademarks, patents and designs.;

3. 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

4. what process to follow in order to deal with those employeesIndividuals 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 companyA private company limited by shares incorporated and registered in England and Wales. 's owners (shareholdersIn 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 companyA 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 shareholdersIn 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 shareA 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 companyA 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 companyA 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 shareA 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 shareA 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 guarantee(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 shareA 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:

1. 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 intellectual propertyA product of human creativity such as copyrights, trademarks, patents and designs.;

2. as between your companyA 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 companyA private company limited by shares incorporated and registered in England and Wales. which are spelt out in the sale agreement;

3. even if the buyer has agreed with your companyA private company limited by shares incorporated and registered in England and Wales. to be responsible for a liability owed to a third partyA 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 companyA private company limited by shares incorporated and registered in England and Wales. and the third partyA 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 companyA private company limited by shares incorporated and registered in England and Wales. will remain on the hook unless the third partyA 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;

4. consents will be needed from parties to your business contracts (what are known as novations) for your companyA 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

5. employeesIndividuals 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 employeesIndividuals 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 companyA private company limited by shares incorporated and registered in England and Wales. 's business and assets are to be sold, and not sharesShares 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 companyA 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:

1. the buyer wants to be sure that a key supplier or customer will be fully on board 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

2. 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 companyA private company limited by shares incorporated and registered in England and Wales. 's business and assets to be time-consuming in terms of:

1. the steps you should take to prepare for a sale (see Preparing a business for sale);

2. the formalities required (see Q&A 15);

3. the buyer's due diligence 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

4. 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 guarantee(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 companyA private company limited by shares incorporated and registered in England and Wales. will be liable to pay corporation taxTax 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 companyA private company limited by shares incorporated and registered in England and Wales. 's shareholdersIn 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 companyA 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 companyA private company limited by shares incorporated and registered in England and Wales. may be liable to pay corporation taxTax payable on profits made from doing business as a limited company. on any gain it makes on the sale and your companyA 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 companyA private company limited by shares incorporated and registered in England and Wales. and a second time when payments are made to your shareholdersIn 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 sharesShares 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:

1. from your board, to start the sale process and to approve the sale documents;

2. from one or more shareholdersIn 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 companyA private company limited by shares incorporated and registered in England and Wales. 's articles of association 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, shareholders' agreementAn agreement entered into between the shareholders of a company which regulates the relationship between the shareholders and governs how the company is run.;

3. from parties to your business contracts (what are known as novations) for your companyA 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

4. in order to discharge your companyA 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 employeesIndividuals 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 companyA private company limited by shares incorporated and registered in England and Wales. sells its business and assets as a going concernA business which is running well enough to stay afloat for at least 12 months., UKUnited Kingdom of Great Britain and Northern Ireland legislationLaws made by the government, usually in the form of Acts of Parliament and regulations.:

1. requires that employeesIndividuals 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;

2. provides that employeesIndividuals 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 companyA private company limited by shares incorporated and registered in England and Wales. to the buyer at the same time as the sale happens; and

3. treats employeesIndividuals 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 unfairly dismissedWhen an employee is dismissed without good reason or without following the proper procedure. (with exceptions).

In practice, whether you sell your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. or its business and assets, there is likely to be detailed due diligence 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 contractand lengthy legal documents to negotiate and agree before the sale can complete.

The main difference between the two sale processes is that more consents will be needed for a business and assets sale (see Q&A 20) than for a shareA 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 10).

In addition, formalities must be observed to be able to transfer certain types of asset such as real estate and intellectual propertyA product of human creativity such as copyrights, trademarks, patents and designs., whereas the only technical formality needed to sell your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. is for the shareholdersIn 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. to sign and deliver share transferThe process used to transfer legal ownership of shares from one member to another, where the shares are sold or given as a gift. forms to the buyer with their share certificatesCertificates which shareholders in a company are entitled to receive evidencing ownership of the shares they hold. (or an indemnityAn agreement that one party will compensate another on the occurrence of a specified event. if lost).

In buying your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. , the buyer will automatically take on all the risks of the business. In comparison, if it buys your companyA private company limited by shares incorporated and registered in England and Wales. 's business and assets it will only take on those risks for which it agrees to take responsibility under the sale documents. It is typically for this reason that a buyer will choose to buy the business and assets.

This does not mean that your companyA private company limited by shares incorporated and registered in England and Wales. 's shareholdersIn 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 be off the hook after selling their sharesShares 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. . A buyer will look to protect itself by requiring undertakingsPromises to do or not do something, commonly contained in a contract. and warranties Promises or assurances in a contract.from the shareholdersIn 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. under the sale agreement.

On a sale of business and assets, your business contracts will only transfer to the buyer with the consents of the other parties. These consents will be needed before your companyA private company limited by shares incorporated and registered in England and Wales. can legally transfer the contracts to the buyer and cease to have any liability under them. Without consents, they will not transfer and your companyA private company limited by shares incorporated and registered in England and Wales. will remain liable.

On a sale of your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. , your business contracts will continue. However, some contracts may contain a right of the other party to terminate if there is a sale of your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. (also known as a 'change of control provision'). These will be reviewed by the buyer as part of its due diligence 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 contractand typically the buyer will require the other parties' consents so it can be sure the contracts will continue.

Your business liabilities will generally speaking be owed by your companyA private company limited by shares incorporated and registered in England and Wales. and following a sale of your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. , unless the terms provide otherwise, will continue in place and become the buyer's responsibility as new owner of the sharesShares 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. .

On a sale of your companyA private company limited by shares incorporated and registered in England and Wales. 's business and assets, however, your companyA private company limited by shares incorporated and registered in England and Wales. will only be able legally to transfer responsibility for its liabilities with the consent of the persons to whom they are owed. Until then your companyA private company limited by shares incorporated and registered in England and Wales. can still be sued even if the buyer has agreed with your companyA private company limited by shares incorporated and registered in England and Wales. to deal with the liabilities.

On a sale of your companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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. , the purchase price will be paid to your companyA private company limited by shares incorporated and registered in England and Wales. 's shareholdersIn 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 the sellers.

In comparison, on a sale of business and assets the seller is your companyA private company limited by shares incorporated and registered in England and Wales. and it, not your companyA private company limited by shares incorporated and registered in England and Wales. 's shareholdersIn 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 receive the purchase price. Your companyA private company limited by shares incorporated and registered in England and Wales. will have to make a separate payment to your shareholdersIn 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. for them to be paid personally.

See Q&A 28 for the impact this has on tax which is payable on the sale proceeds.

1. Tax for a companyA private company limited by shares incorporated and registered in England and Wales. and its owners

   Probably the most important advantage for your companyA private company limited by shares incorporated and registered in England and Wales. 's owners of selling sharesShares 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. instead of your business and assets is that the purchase price will be paid to them, not your companyA private company limited by shares incorporated and registered in England and Wales. . They will normally be subject to capital gains taxCGT: A tax on the profit when certain assets are sold (or disposed of) that have increased in value. It is the gain in value an individual has made that is taxed, not the actual amount of money received. (CGTCapital Gains Tax: A tax on the profit when certain assets are sold (or disposed of) that have increased in value. It is the gain in value an individual has made that is taxed, not the amount of money received.) if they sell for a profit and they may be able to reduce or delay the amount of CGTCapital Gains Tax: A tax on the profit when certain assets are sold (or disposed of) that have increased in value. It is the gain in value an individual has made that is taxed, not the amount of money received. if eligible for tax relief - for example, if they qualify for entrepreneur's reliefTax relief which, if available to a selling shareholder, may reduce or delay the capital gains tax otherwise payable by that shareholder, or if the sharesShares 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. sold qualify for SEISThe Seed Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS. or EISThe Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS. relief (see Preparing a business to raise money for guidance on SEISThe Seed Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS. and EISThe Enterprise Investment Scheme. An HMRC scheme to encourage investments in small, growing companies by giving tax relief against share investments subject to satisfying certain conditions. A company can raise significantly more under an EIS than under an SEIS.).

   By comparison, if your companyA private company limited by shares incorporated and registered in England and Wales. sells its business and assets, the purchase price will be paid to your companyA private company limited by shares incorporated and registered in England and Wales. not shareholdersIn 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.. Your companyA private company limited by shares incorporated and registered in England and Wales. is likely to pay tax on the sale proceeds, especially if sold for a profit, and then the shareholdersIn 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. are likely to be taxed if this money is paid to them by your companyA private company limited by shares incorporated and registered in England and Wales. .

   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.

2. Tax for a buyer

   There may be tax benefits for a buyer in purchasing a business and assets rather than sharesShares 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. (such as obtaining capital allowances for the cost of plant and machinery). However, the stamp duty which a buyer will pay on sharesShares 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. could be significantly lower than on some assets such as real estate.

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.

If your companyA private company limited by shares incorporated and registered in England and Wales. sells its business and assets as a going concernA business which is running well enough to stay afloat for at least 12 months., UKUnited Kingdom of Great Britain and Northern Ireland employment legislationLaws made by the government, usually in the form of Acts of Parliament and regulations. (known as TUPEThe Transfer of Undertakings (Protection of Employment) Regulations 2006. A set of regulations which dictate the protections that employees have when their employer changes.) requires that:

1. employeesIndividuals 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;

2. the employeesIndividuals 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 companyA private company limited by shares incorporated and registered in England and Wales. to the buyer at the same time as the sale happens; and

3. employeesIndividuals 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. have the right not to be unfairly dismissedWhen an employee is dismissed without good reason or without following the proper procedure. in connection with the sale.

When a companyA private company limited by shares incorporated and registered in England and Wales. 's sharesShares 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, TUPEThe Transfer of Undertakings (Protection of Employment) Regulations 2006. A set of regulations which dictate the protections that employees have when their employer changes. does not usually apply as the companyA private company limited by shares incorporated and registered in England and Wales. will remain the employerA person or business hiring one or more staff members. and so will continue to be responsible for its employeesIndividuals 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..

The complications in relation to TUPEThe Transfer of Undertakings (Protection of Employment) Regulations 2006. A set of regulations which dictate the protections that employees have when their employer changes. can of themselves be an important factor(In finance) A financier who provides finance to a business by buying the business's debts under the terms of a factoring agreement. in structuring the sale of your business as a shareA 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 instead of a sale of business and assets. See Transferring employees to another business for more guidance on TUPEThe Transfer of Undertakings (Protection of Employment) Regulations 2006. A set of regulations which dictate the protections that employees have when their employer changes..

1. Sale of sharesShares 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. – clean break for a companyA private company limited by shares incorporated and registered in England and Wales. 's owners, buyer takes the risk

   As a result of selling their sharesShares 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 assuming they do not continue as employeesIndividuals 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., directorsThe directors of a company are the individuals who make up the company's board of directors. Directors may be natural persons or companies, but each company must have at least one director who is a natural person. The board is the main decision-making body of the company. or in any other capacity, your companyA private company limited by shares incorporated and registered in England and Wales. 's owners will generally speaking cease to be involved with or have any responsibility for your business.

   This is because the assets and liabilities of the business are with your companyA private company limited by shares incorporated and registered in England and Wales. not the shareholdersIn 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 will automatically pass to the buyer through its ownership of the sharesShares 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. .

   As between the shareholdersIn 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, the shareholdersIn 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 however have potential liabilities under the sale agreements.

2. Sale of business and assets – owners still on risk, ability of a buyer to cherry-pick

   By comparison, on a business and assets sale, even if a buyer agrees to take over some or all of your companyA private company limited by shares incorporated and registered in England and Wales. 's liabilities, your companyA private company limited by shares incorporated and registered in England and Wales. could still be sued on these by the persons to whom the liabilities are owed. This is because of the legal rule that liabilities do not transfer without the consent of the person to whom they are owed.

   The advantages for a buyer, however, are its ability to choose which assets to buy and which liabilities it is prepared to take on. These will be matters of negotiation with your companyA private company limited by shares incorporated and registered in England and Wales. 's owners and will be reflected in the sale agreement.