Selling a business is one of the most significant decisions an owner can make. Whether you are a sole trader, partner, or company director, the sale process in the UK involves complex legal, financial and commercial considerations. Understanding the different methods of selling a business, and the potential risks involved, is essential for achieving the best outcome.
At Penerley Solicitors, our experienced corporate and commercial lawyers guide clients through every stage of the sale process, ensuring compliance, clarity and protection at every step.
Share Sale
A share sale involves selling the shares of a limited company to a buyer. In this method, the buyer purchases the company as a whole – including all its assets, liabilities, contracts, and employees. The company continues to exist as before, but under new ownership.
This is often the simplest route for continuity. Customers, suppliers and employees may experience minimal disruption since contracts and relationships remain with the company. The seller may also benefit from favourable tax treatment under Business Asset Disposal Relief (formerly Entrepreneurs’ Relief). Because the buyer inherits all liabilities, they will usually carry out extensive due diligence. Any undisclosed debts, disputes or compliance issues can cause delays or lead to price reductions. The seller will often be asked to give warranties and indemnities in the share purchase agreement (SPA), which could expose them to future claims if problems arise.
Asset Sale
In an asset sale, the buyer purchases specific assets of the business – such as property, equipment, stock, goodwill, or intellectual property – rather than the entire company. This method is often preferred when buyers want to exclude certain liabilities or only acquire part of a business. The buyer can choose which assets to purchase and which liabilities to leave behind.
This approach provides flexibility and can be ideal for smaller businesses or divisions of larger companies. Each asset must be transferred individually, which can be time-consuming and legally complex. Contracts with suppliers or customers do not automatically transfer and may need consent. Employees will normally transfer under the TUPE Regulations (Transfer of Undertakings (Protection of Employment) Regulations 2006), which means employment rights are preserved.
Management Buyout (MBO)
A management buyout occurs when the existing management team purchases the business from its current owners. This can be structured as either a share or asset sale.
Management already understands the business and can ensure continuity. It can also provide a smoother transition and greater confidence for staff and clients. Financing an MBO can be challenging. Managers may need external funding or investment, which can lead to complex shareholder arrangements or security interests. The transaction must also be carefully managed to avoid conflicts of interest, especially where the management team is involved in negotiations on both sides.
Merger or Acquisition by Another Company
A merger or acquisition involves selling the business to another company, often as part of a larger corporate strategy. This can take the form of a share or asset sale, depending on what best suits the parties.
A merger can bring new investment, market access and growth opportunities. It can also allow the seller to retain a minority stake or advisory role post-sale. These transactions are often complex and may require competition-law clearance or regulatory approval in certain sectors. Cultural integration can also be challenging, and deal structures may involve deferred payments or earn-out provisions, which carry risk if future targets are not met.
Selling to an Employee Ownership Trust (EOT)
An increasingly popular option in the UK is selling to an Employee Ownership Trust, where employees collectively acquire a controlling interest in the business.
EOTs can offer significant tax reliefs, including capital gains tax exemptions for qualifying sales. They can also preserve the company’s culture and reward long-serving employees. EOT structures are complex and require careful planning to meet HMRC’s qualifying criteria. Valuation, funding and governance arrangements must be handled carefully to avoid later disputes.
Why Legal Support is Essential When Selling a Business
Each method of selling a business carries its own legal and commercial risks. From due diligence and disclosure to employment law, tax planning, and contract transfers, every stage must be handled carefully to protect your interests.
Having experienced business solicitors ensures that every aspect of your sale is handled with care and precision. They make sure the transaction documents accurately reflect your intentions, that all liabilities and obligations are properly managed, and that every regulatory and tax requirement is fully met. With the right legal support, your business sale can proceed smoothly and efficiently from start to finish, giving you peace of mind throughout the process.
At Penerley Solicitors, we provide tailored advice for business sales and acquisitions across London, Canary Wharf, and the wider UK. Whether you are selling shares, assets or transferring ownership through a management buyout or EOT, our team can guide you through the process with clarity and confidence.
Contact Us
If you are considering selling your business, speak to Penerley Solicitors for clear, practical advice on how to achieve the best result while protecting your interests.
Contact our Corporate and Commercial Law Team today to arrange a confidential consultation.
