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Buying/Selling a Business – Shares or Assets?

March 15th, 2017

It is widely understood what a purchase or sale of a business is, especially since the recent financial climate has affected so many businesses. We have grown accustomed to seeing well known retailers change hands or simply shut down.

However what does it mean to buy the shares or assets of a company? If you are looking to buy/sell, it is important to decipher the differences.

The key distinctions between the two structures are the following:

Share Purchase:

  • The buyer will purchase all the shares in the company that owns the business;
  • Assets, liabilities and obligations are also purchased. This includes any that the potential buyer may not be aware of;
  • Shares are transferred through a stock transfer form;
  • Less consents required-no real need for third party consents;
  • The buyer purchases a company which in turn owns a business and is running it. The existing contracts will remain;
  • The tax consideration is more beneficial to the seller than the buyer;
  • The seller will transfer all liabilities.

Asset Purchase:

  • The buyer purchases each of the individual assets that make up the business;
  • Only the identified assets and liabilities that the buyer agrees are purchased;
  • The assets will need to be transferred individually. For example, property will need to be transferred by conveyance;
  • More consents required in relation to suppliers/landlords etc.;
  • Contracts and trade agreements are not automatically transferred;
  • The tax consideration is more beneficial to the buyer than the seller;
  • The buyer is able to “cherry pick” the assets.

Whichever structure is used, the respective party should be aware of all the considerations that will affect their acquisition or disposal.

Every business works in a different way and as a result there is a no one rule which should be applied universally.

Should you have any queries relating to the same, please do not hesitate to contact a member of our team on 01494 773377.

 

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