Sale of small businesses
If you are considering purchasing or selling a business, be that a small company, an LLP, a partnership or a sole trading business, London Registrars will be able to assist you and guide you through the various steps.
Every sale is unique but the process generally will involve three stages:
The preparatory stage of selling a business would involve steps such as appointing advisers (such as financial, tax and legal advisers), obtaining a valuation of the business, obtaining tax advice, and preparing the business for sale by taking steps to increase its value.
The marketing stage of selling a business would typically involve market research and marketing, managing confidentiality, preparation of sales memorandum, preliminary offers, negotiating terms, and agreeing heads of terms.
The completion stage of selling a business would involve undergoing due diligence and the preparation of the final business sales agreement.
There are two ways in which a company limited by shares (or an interest in a company limited by shares) can be sold: one is by way of a sale of shares and the other a sale of assets.
A sale of shares involves a buyer buying all the shares in a company, with the result that the company and its entire business is sold.
A sale of assets on the other hand involves a buyer purchasing the assets it wishes to acquire, which might be the whole or part of the business. Such a sale enables buyers to pick and choose which assets and which liabilities they are prepared to take on, with the exception of employment liabilities. These generally transfer automatically by virtue of TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006). Where there is a sale of assets, the shareholders will retain the shares in the company and the buyer buys only the assets in which he or she is interested in. This is particularly relevant where the company has liabilities which the buyer does not wish to be responsible for.
In the case of an LLP or a simple partnership, selling a business can only be achieved by way of a sale of assets. Subject to the terms of the partnership agreement, a partner desiring to sell his share of the business may resign and a new partner may be appointed in his place.
Selling a business, in the case of a sole trader, is also achieved by way of a sale of the assets and goodwill. A sole trader who desires to sell only a part of his or her business while remaining in the business would have to consider the appropriate form of business to enter into, such as a partnership, an LLP, or a limited liability company.
Our experienced staff are able to assist with all legal aspects of selling a business, such as preparation of non-disclosure agreements for the purpose of managing confidentiality, drafting ‘heads of terms’ to set out the key points of the deal, carrying out due diligence to review commercial aspects of the business, effecting transfers of shares and registration of the change of shareholders at Companies House (if applicable), and once the sale has been finalised, preparation of the business sales agreement. Our range of services extends to the incorporation of companies and LLPs and drafting of partnership agreements.
When selling a business, there are also employment law considerations to take into account as TUPE contains far-reaching rules for the protection of employees’ rights on the transfer of a business or part of a business (called an ‘undertaking’ under TUPE). The general law on unfair dismissal and redundancies still applies in situations where a relevant transfer of undertaking occurs and in addition, TUPE provides safeguards which limit the ability of employers to dismiss employees. We are able to provide legal advice and offer guidance on TUPE to enable parties to meet their legal obligations as employers.
Our experienced staff are also able to undertake the burden of project managing the process of selling a business, liaising with professional and specialist advisers as appropriate up until the preparation of the final business sales agreement.
If you would like to discuss your own company’s position vis-à-vis purchasing or selling a business or its assets, please call us on 0845 519 2101 and ask for Peter Driver.
London Registrars plc
Principal and registered office: Suite A, 6 Honduras Street, London EC1Y 0TH.
Tel: 0845 519 2101 Fax: 0845 519 2103 Email: firstname.lastname@example.org
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