Selling your Company

Selling your Company

There are two ways of selling your company; one is to sell the shares of the company which will include all of the companies’ assets, liabilities and obligations. The other option is to simply sell the assets which make up the company along with any liabilities specifically identified by the buyer. 

The more common type of sale tends to be share sales by private limited companies.

Stages of a Share Sale

1. Confidentiality

When a potential buyer is identified, one of the first and most important documents you should be looking for both parties to sign, before negotiations commence and information is disclosed, is a confidentiality/non-disclosure agreement. This will ensure that any information disclosed remains confidential between the parties. 

2. Due Diligence

The next stage involves the buyers detailed investigations regarding the company, known as due diligence. The buyer’s solicitor will work with the buyer to tailor a due diligence questionnaire which is then sent to the seller’s solicitor for a response. They will also require the seller to provide any requested documentation. A due diligence questionnaire will usually request information on:

• Company capital and structure
• Real property
• Intellectual property
• Employees
• Disputes and Litigation
• Accounting

This process gives the buyer a detailed overview of the company’s value and enables the buyer to investigate any elements which may require further investigation. Any issues that are found throughout the due diligence process are likely to enable the buyer to negotiate on the purchase price.

3. Share Purchase Agreement (SPA)

This is a key document in any share sale. The SPA is the contract by which you agree to sell, and the buyer agrees to buy, the shares in the company. The purpose of the SPA is to set out the shares you are selling, the consideration you will receive from the sale, how the purchase price will be paid and any post-completion obligations.

4. Disclosure Letter

Once the SPA has been agreed upon, a disclosure letter will be sent from the seller’s solicitor to the buyer’s solicitor with the intention of making any further disclosures that relate to the warranties requested. If necessary, further documentation as well as a disclosure bundle may be sent. This stage presents one of the final opportunities for a seller to reveal any issues regarding the company or advise if they will be unable to comply with the warranties. A failure to comply with the warranties will lead to a breach of contract and entitles the buyer to make a claim for damages.

5. Exchange and Completion 

At exchange, the parties formally agree to enter into the transaction, usually by executing and delivering the share purchase agreement. At completion, the necessary formalities to conclude the transaction are performed as well as providing the key documentation, with the buyer paying the purchase price to the seller.

6. Post Completion 

After completion, both parties are now free to go their separate ways, however on many occasions there tends to be some sort of involvement with the company, by the seller, whether it be on a consultancy basis or just to ensure the buyer is able to get to full grips with the new company he has purchased. On these occasions it is often best to enter into a separate consultancy agreement.