Should I buy/sell the shares in a company or just its business and assets?

When selling shares in a company, the entire business, including all assets and liabilities of the company all transfer to the buyer. Sellers tend to prefer this approach as it is a cleaner break for them and ensure they retain no liabilities going forward.

A business and asset sale involves only specified business assets and liabilities of the company being transferred to the buyer. The company itself remains with the seller, including any assets and liabilities that are not specifically transferred to the buyer and so remain in the company name. This approach allows buyers to cherry-pick what they do and don’t acquire, so they tend to prefer it for that reason. In particular, it ensures the buyer does not take on liabilities which it does not want or which might not be known at the time of the sale (such as tax liabilities to HMRC).

However, this is a very simplistic summary and it is very important to take advice from your solicitor and accountant/tax adviser as the following points also need to be taken into account:

• Tax implications of each approach.
• Bargaining power of the buyer and seller, respectively.
• Any issues with regulatory approval or third party contracts (including leases) if the business is transferred out of the current company.
• The likelihood of there being unknown liabilities in the company that is to be acquired.