If your business is run as Company, when preparing to sell, one of the most important decisions you will make is how to structure the transaction. While a share sale and an asset sale are both valid methods of selling a business, it is important to understand the key difference between the two approaches.

What’s the Difference?

Share Sale/ Purchase

In a share sale/purchase, the buyer acquires the shares of the business from the Company shareholders. The Company as a legal entity remains intact, meaning all its assets, contracts, and liabilities transfer to the buyer. The only change is the ownership of the shares.

Asset Sale / Purchase

In an asset sale/ purchase the buyer selects specific assets from the Company (sole trader or partnership) such as only those contracts the buyer wishes to keep and (sometimes) liabilities of the business. The seller retains ownership of the Company (or the remaining parts of the sole trader or partnership business). Only the agreed components are transferred.

So Which Structure is Right for your Business?

Share Sale

Pros:

• The transaction is simple- the buyer acquires all the shares, therefore owning the business as a whole. This avoids the need to transfer individual assets or contracts.
• There is no disruption to the business or employees and day-to-day functions continue as normal.
• There is a clean exit for the seller, who transfers all liabilities to the buyer.

Cons:

• The buyer inherits all historic and current liabilities; they cannot pick and choose what to purchase.
• A lengthier due diligence process is necessary, meaning completion may take longer.
• All shareholders must agree to the sale, unless drag-along provisions apply. For more information, click here. 

Asset Sale

Pros:

• Buyer can cherry-pick assets and leave undesirable liabilities with the seller.

Cons:

• TUPE obligations apply, meaning that employees transfer with full rights and must be consulted. (For more information on TUPE provisions, reach out to our expert Employment Law team! 0333 888 1360)
• Third-party consents may be needed for licences, leases, or contracts.

Picking Your Team and Tax Considerations

When making any important business decision, including the decision to sell (or buy) it is essential that you received the right advice. For the sale to run smoothly, you will require support from an expert Company and Commercial Lawyer, as well as an Accountant or Tax Advisor.

Tax considerations play a huge role in deciding how to structure transactions:

• In general, share sales tend to be more tax advantageous for the seller, particularly where reliefs such as the Substantial Shareholding Exemption (SSE) or Business Asset Disposal Relief apply.
• On the other hand, asset sales are often more tax efficient for the buyer, who may be able to claim amortisation relief on qualifying intangible assets.

At Bhayani Law, we provide expert legal advice on Company & Commercial and Employment matters, and we also recognise the importance of collaborating with you and your wider professional team to deliver a smooth and commercially sound transaction. Our team has extensive experience partnering with accountants and tax professionals to ensure every aspect of the sale is aligned. Where required, we can also introduce trusted corporate finance and accountancy specialists tailored to your specific needs.

Practical Examples

• If you are selling your family-run company with loyal customers, long-term leases, and key contracts- a share sale might protect that continuity, while giving you a clean break from any liabilities.
• If you are selling your business but wish to keep the property owned by the Company for rental income after the sale, an asset sale offers the flexibility to exclude the property and only transfer the trading elements of the business (e.g. customer contracts and staff).
• There may also be benefit in exploring pre-sale re-organisation steps such as moving property to a subsidiary or setting up a Parent Company and selling the Trading Company shares.

How can Bhayani Law Help?

If you’re thinking about selling your business, the commercial and employment law specialists at Bhayani Law are on hand to help you through the process. Our team will work closely with you to understand the structure of your business, your commercial goals, and any specific risks or complexities that may influence the most suitable approach.

To find out whether a share sale or an asset sale is more appropriate for your business, speak to the experts at Bhayani Law on 0333 888 1360 or email [email protected]. We’re here to support you with clear, practical advice tailored to your needs.