Exit and Succession Planning

Planning for Your Future

An exit does not necessarily mean selling the business immediately. You may want to retire gradually, reduce your involvement, transfer ownership to family members or employees, or prepare the company for an eventual sale.

Possible exit and succession routes include:

• selling the shares in your company;
• selling some or all of the business assets;
• a management buyout or buy-in;transferring shares to family members or existing shareholders;
• moving towards employee ownership;
• appointing a new management team while retaining an ownership interest; or
• gradually winding down the business.

The right approach will depend on your personal objectives, the ownership and management of the business, its financial position and the needs of other shareholders. Tax and financial advice will also be important when assessing the available options.

Preparing the Business

A business that is well organised and less dependent on its current owner will generally be easier to transfer or sell. Preparing in advance gives you time to address matters that could otherwise affect the value of the business or delay your plans.

This may involve reviewing:

• the company’s articles of association and any shareholders’ agreement;statutory registers and Companies House records;
• the ownership of shares and any existing share options;
• important customer and supplier contracts;intellectual property ownership;
• employment and consultancy arrangements;
• third-party consents and change-of-control provisions;
• personal guarantees or security given by the owners; and
• the company’s decision-making and management structure.

We can help identify gaps in the company’s legal arrangements and put appropriate documents in place before an exit process begins.

Ownership and Management Succession

If ownership or management will pass to family members, employees or an existing management team, the arrangements should be carefully documented.

This could include transferring shares in stages, introducing different classes of shares, granting share options or agreeing how the outgoing owner will be paid. The company may also require revised articles of association, a new shareholders’ agreement or changes to its board and governance arrangements.

Clear documentation can establish how decisions will be made, what responsibilities the new owners or managers will have and whether the outgoing owner will remain involved during a transitional period.

Where succession arrangements form part of your personal estate planning, we can work alongside your private client, tax and financial advisers to ensure that the different elements of your plan are coordinated.

Preparing for a Sale

If your preferred exit is a sale, early preparation can help make the business more attractive to potential buyers and allow the transaction to progress more efficiently.

We can help you prepare for due diligence, review confidentiality agreements and heads of terms, and identify any corporate or contractual issues that should be addressed before the business is marketed.

Once the structure of the transaction has been decided, our Selling a Business – Share Sale and Selling a Business – Asset Sale services provide more information about the legal support available.