If you’re buying or selling a business in the UK, one of the first decisions you’ll face is the structure of the deal: should it be a share sale or an asset sale? These are very different legal mechanisms, and choosing the right one can have significant implications for both parties.

What is a Share Sale?

The buyer acquires the shares of the company itself. This means they take on everything the company owns – its contracts, employees, intellectual property, and goodwill — but also everything it owes, including historic liabilities, debts, and any legal disputes. The company continues to exist and operate; it simply has new owners.

Share sales offer a clean exit for sellers. Once the shares change hands, the seller’s involvement ends. For buyers though, taking on a company “warts and all” means thorough due diligence is essential.

What is an Asset Sale?

The buyer purchases specific assets from the company — such as equipment, stock, intellectual property, customer contracts and/or employees — rather than the company itself. The seller’s company remains owned by the seller; only the chosen assets transfer.

This gives buyers greater control and flexibility. They can select which assets they want and, crucially, leave behind unwanted liabilities. Asset sales are therefore popular where there are concerns about a target company’s historic liabilities.

Documenting an asset sale typically requires a detailed asset sale agreement, which will set out precisely which assets are being transferred, the apportionment of consideration (payment), any liabilities being assumed, and the conditions attached to the transfer.

Where employees transfer, both buyer and seller need to be sure to comply with the requirements of TUPE. This can add a layer of complexity to an asset transfer and parties should be sure to obtain specialist advice on the area.

Which is Right for You?

The answer will depend on your tax position, risk appetite, the nature of the business, and the priorities of both buyer and seller.

Our experienced team can help you to decide which approach is best for you and take you through every step of the process of the transfer of shares or assets. Get in touch to find out more.

As always, the team are here to help you.  To get in touch just call us on 020 3740 2370 or email info@clearlybusinesslaw.co.uk