The legal side of selling your business/company
If you’re selling your small or medium-sized enterprise, bringing in an experienced corporate and company lawyer makes the process so much easier. Let’s find out more.
There are many reasons why you might want to sell your company or business. Perhaps you want to retire or enjoy a complete career change, or you’ve managed to secure a brilliant offer for your company or business. Whatever the reason, you need to know that selling your business or company can also be a complex and often time-consuming legal process during which you will benefit from the right professional support.
In this article, we’ll look at some of the legal aspects of selling your company. We’ll also explain why having a great company/corporate lawyer in your corner helps the process run much more smoothly. Let’s get started.
Share sale vs asset sale
There are two routes you can take when choosing to sell your business or company: a share sale, or an asset sale. Let’s look at both of these.
A share sale involves the buyer purchasing all the shares in your company, instead of just certain assets alone. When you choose a share sale, you sell your entire company and everything in it, including all the benefits and any liabilities. You will be selling a separate legal entity that will remain the same, with just the ownership changing hands. Therefore, this will include the buyer acquiring any properties, staff and customer contracts as well as any historic tax liabilities – lawyers often refer to this kind of transaction as “warts and all” – in simple terms, selling all the good stuff and all the bad stuff too! So, it’s vital to have experienced advisers on board to guide you through the process.
An asset sale is different, as only selected, specified assets will be transferred. These may include goodwill, intellectual property ownership and client contracts, to name a few. The seller and buyer can choose which parts of the company they want to form part of the acquisition, with only those specific assets changing hands. An asset sale can be a good choice if you want to sell off only certain parts of your business. The seller will maintain ownership of the underlying company as a legal entity. It is important to specify any assets which will not be getting sold that you might want to retain.
The legal aspect of a share sale
If you are new to the process, it can be surprising how much work and complex legal documents are involved with selling your company, which can be a bit daunting without the right people onside to help. The main legal document which will be drafted and negotiated during the course of a share sale is called a “Share Purchase Agreement”. Depending on the type of sale, this agreement can vary in length and complexity. During negotiations, there are several legal issues to consider in detail, which is why you need a knowledgeable and skilled lawyer in your corner to offer you the right protections. These issues can include:
Warranties – as a seller, it is likely that you will need to make promises about various aspects of your business and company. If these assurances do not prove to be true or are misleading, the buyer may be able to bring a claim for damages for any loss they suffer;
Limitations of liabilities – for you as the seller, it’s vital that your liability under the sale agreement is limited and make sure caps are put in place, including for the monetary amount that a buyer can seek to recover and a time limit for doing so;
Tax issues - selling a business can have complex tax implications for you. We work seamlessly with specialist tax advisers (who we can recommend) to make sure you are getting the protections you need and always strongly advise that you get professional tax advice at an early stage when you sell your company; and
Future restrictions – a buyer will want to ensure that the seller cannot compete with the company they have just acquired, and we can guide you through these restrictions, to make sure they are fair and balanced.
It is also likely that several further important documents will sit alongside the main share purchase agreement. This will usually include a disclosure letter to ‘disclose’ information against the warranties together with a number of ancillary documents, such as resignations and waivers of future claims against the target company, plus appropriate corporate approvals (such as board and shareholder resolutions to approve the transaction).
Again, it’s imperative that you get the appropriate guidance on all this.
Why you need a corporate lawyer in your corner
With so many legal aspects to selling your company, it’s essential that you have an expert company/corporate lawyer on your side.
A good lawyer will guide you through the process from start to finish, explaining each legal obstacle and the implications, how to overcome these, and how best to protect yourself.
Your lawyer will help you negotiate the deal and get the best outcome for you but hopefully in a sensible, ‘commercial’ way, that helps you make progress, not acting as a ‘bump in the road’, slowing everything down.
Couchman Hanson will do all we can to make the process a smooth and stress-free one, the end result being the successful sale of your company.
Find out more from Couchman Hanson
Quite simply, an experienced corporate and company lawyer will protect you and your interests as you sell your company. We’ll help reduce your risk and ensure the sale goes as smoothly as possible. Once the deal has gone through, you can enjoy the next chapter, whether that is getting stuck into another business or enjoying a well-earned break or retirement.
All being well, you will have sold your company or business for a healthy profit but it’s important to think about what to do afterwards, whether that includes getting your will and personal affairs in order or seeking guidance on property or other matters. We can help with all this.
At Couchman Hanson, our solicitors genuinely care about getting the best outcome for you. We’re highly professional, with ‘City’ level talent and experience, but also friendly and welcoming. Everything we do fits with our values of integrity, honesty and authenticity.
Call 01428 774756 or visit couchmanhanson.co.uk