Share Sale

A share sale will avoid many of the pitfalls associated with starting up a business, although it is vital to have all of the information about the existing business in order to determine whether the purchase is suitable. This can involve wading through hundreds of documents and so a solicitor will be essential.

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Advantages

  • Generally more likely to succeed than a start-up business
  • The business is already operational
  • There is an existing customer/client base

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Disadvantages

  • Expensive – both in terms of purchase price and legal costs
  • The process can be very time-consuming
  • Significant research needs to be undertaken beforehand

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When faced with the option buy assets or shares, a buyer will generally prefer the company’s assets, as they will have discretion as to which assets and liabilities they choose to take on. This may not be the case where the business owns several lucrative contracts where the consent to transfer may not be available. A share purchase will also avoid delays in dealing with the property, as ownership will still be vested in the company. They will also be able to offset previous tax losses against future profits.

A seller will generally prefer to dispose of the shares in the business, as this will remove their involvement with the company, including liability for any of its debts (unless the seller is a personal guarantor). Where an asset sale takes place, the seller may need to negotiate with the buyer to take over those assets and/or liabilities which they are desperate to offload. This is likely to affect the sale price, as the buyer may be reluctant to take on such assets or liabilities.

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