Buying or Selling a Company

excellent legal advice, grounded in business realities

Buying or selling a business can be a daunting prospect and for many people who find themselves involved in a business sale for the first time, nothing in their previous experience will properly prepare them for it.

There are two main ways in which to acquire a business that it already trading. These are:

  • an asset sale, in which all (or only some) of the assets and contracts of the business are transferred to the buyer, but the company that owns the business does not change ownership
  • a share sale, in which the shares in the company that owns the business transfer to the buyer.

For detailed information on share sales and asset sales, follow these links:
Share sales
Asset sales

Where the business is owned by an individual or a partnership and is not a limited company, the deal will have to progress by way of an asset sale. However, where the business is owned by a limited company, the buyer and seller can choose whether to proceed via a share sale or an asset sale. If an asset sale, then the company will be the seller. If a share sale, then the company itself will be what is being sold, and the seller(s) will be the shareholder(s) in that company.

There are advantages and disadvantages for both buyer and seller in share sales and asset sales. The differences between the two are set out below:


  • Share sale - the business continues in the same form. The legal entity carrying on the business remains the company, so to the outside world it may be presented as if nothing has changed. This also means that existing trading contracts will generally be unaffected (although some contracts contains terms that allow for termination if there is a change in ownership of the contracting company).
  • Asset sale - the buyer becomes the trading entity. This means that all existing contracts have to be transferred (which often requires the consent of the relevant customer or supplier). It can also be difficult to preserve the reputation of the business, if it is indistinguishable from the seller in the public eye.


  • Share sale – all of the existing liabilities of the business will remain with the business, so will indirectly become the responsibility of the buyer. This is the case even if the buyer and seller did not know and could not have known about the liabilities.
  • Asset sale – existing liabilities remain with the seller, unless the buyer expressly agrees to take them on.


The treatment of staff is usually little different between a share sale and an asset sale. With a share sale, the employer does not change. With an asset sale, the employees transfer to a new employer. This usually happens by automatic operation of law and is extremely difficult to avoid. The Transfer of Undertakings (Protection of Employment) Regulations (often known as TUPE) mean that not only do the employees generally transfer automatically to the new owner of a business, but they do so as if they had always been employed by the buyer, so all existing liabilities of the seller are taken over by the buyer.


  • Share sale – assuming that they belong to the company, the assets of the business will all remain with the company when its ownership transfers to the buyer, even if the buyer and/or seller do not know about them. 
  • Asset sale – the assets will have to be sold to the seller. The parties can choose which assets will be transferred, and the agreement between the buyer and seller must specify what assets are being sold to the buyer and what are being retained by the seller.


  • Share sales - VAT is not chargeable on a sale of shares.
  • Asset sales - VAT is not chargeable if the sale is of a business as a going concern. If this condition is not met, then VAT may be payable on the sale.

Stamp Duty

  • Share sales – stamp duty is payable at the rate 0.5% of the purchase price.
  • Asset sales – stamp duty is not payable on most assets. The most obvious type of asset where stamp duty is payable on a transfer is land.

There are many common elements in a business sale, whether it proceeds as a share sale or as an asset sale. The buyer will wish to undertake careful enquiries, to ensure that he knows what he is buying. The parties will need a clear understanding of what is being paid and what the payment terms are.  There may be an enhanced or reduced purchase price according to the current or future performance of the business.  There will generally be a comprehensive contract dealing with the transaction, which can appear very complex to a person not experienced in such matter.


The tax treatment for both buyer and seller may vary according to whether the deal is a share sale or an asset sale. The parties should therefore seek advice from a tax adviser or accountant at an early stage.

How can we help?

We are very experienced in advising on business sales and purchases.  We can also advise on all the legal issues that arise in running a business, such as property and employment matters and all kinds of commercial agreements. If you have any questions or are looking for information on business purchases or any other business law matter, please contact Catherine Drew