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Share Sale vs Asset Sale – what’s best for your business?

Share Sale vs Asset Sale – what’s best for your business?

A share sale, as the name suggests, will result in the sale of a company (limited by shares) as a whole. All assets and liabilities following with the company to the new shareholders (owners).

An asset sale on the other hand, involves the sale of specific assets only leaving the remaining aspects of the company (unwanted assets and liabilities) behind with the previous owners.

It is much easier to understand, if you imagine everything that makes up a business (the customer list, the stock, the name, the vehicles (if there are any), the employees etc) and put it in a box. The box itself is the company. If you buy the shares of a company, you buy the box (and everything that it inside). If you buy the business and assets, you buy those items you want from inside the box, leave the box behind and put it in your own new box (company).

Which type of deal is the most suitable for my business?

Unfortunately and due to the complex nature of these transactions, deciding whether a deal should be agreed in the form of a share sale or an asset sale can be difficult. There is rarely a clear argument as to why it should be one over the other and some form of negotiation is usually required at an early stage.

There can be legal and financial ramifications with both share sales and asset sales and advice from both legal and financial professionals should be sought when determining which is most appropriate.

Where the business to be sold is owned by a partnership/sole trader then the sale will be treated as an asset sale for the obvious reason that there are no shares to be sold.

Below are some common reasons why a person may wish to choose one option over the other.

Share Sales

  • A share sale is generally simpler but also more preferable for a seller. It allows the seller to have a clean break from the company as the buyer takes on the business completely, including all assets and liabilities. Inevitably, a buyer would wish to limit the risks they face by implementing comprehensive warranties and indemnities for particular issues of concern to them.
  • The due diligence process for a share sale is usually much more involved as a buyer will want to be very clear on all aspects of the company. This process can be time consuming but also very involved for the seller, as almost every aspect of the business and the relevant documentation associated to each will be scrutinised.
  • In terms of property ownership (both assets and real estate) the company, as the owner, will remain the same and it is highly unlikely that there will be any need to deal with such matters further (such as liaising with landlords/transferring ownership etc).
  • Generally speaking, a share sale is procedurally much more discreet than a share sale as the company will be continuing as it had before. Third parties, including employees, will not usually be involved. There is, however, a chance that third party involvement is required and particularly where there are 'change of control' provisions within contracts or personal guarantees provided by existing shareholders.

Asset Sales

  • An asset sale will require the buyer and seller to agree which assets and liabilities will be transferred on completion. The buyer can be somewhat selective about the risks they are to take on from the outset and the contract itself is therefore relatively straightforward to negotiate. From a buyer's perspective, it is possible to retain aspects of a business that you may wish to sell at a later date as the seller also retains ownership of the limited company (which may need to be closed down following the sale process depending on whether there is any aspect of the business left to continue with).
  • Due to the buyer and seller determining what is to be sold early on in the process, less due diligence is generally required as the buyer will have agreed to the liabilities they are to take on. There is still due diligence to be carried out for the buyer to ensure that the liabilities they have agreed to take on are as they appeared throughout the negotiation process and there are no further liabilities that the buyer may not be aware of.
  • Where the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) are to apply to employees of the business, the terms and conditions of employment and continuity of employment will likely transfer to the buyer. There are specific processes which must be followed when dealing with the transfer (or not) of employees and appropriate legal advice on this is strongly recommended.
  • Contracts do not pass automatically on an asset sale and as the parties to the contract will change as a result of the transaction, further negotiation will need to be had between the buyer and third parties. If there are third parties that are not agreeable to a contract being changed, this could be detrimental to the business and caution should be taken by the buyer when negotiating an asset sale to take into account this risk.
  • Property, and in particular leasehold property, is treated similarly to how general contracts are treated on an asset sale (as set out above). The right to use property does not pass automatically to a buyer and the negotiation/involvement of the seller's current landlord will be required. Inevitably this can cause further complications and added costs to the process and worth considering from the outset.

Further information

Wards' Commercial and Corporate team offer specialist one-stop-shop legal advice for all types of business - from start-ups to established companies - covering areas including setting up a new business, growing a business and financing, securing premises and strategies for business succession. Find out more here

Get in touch

For an initial discussion or advice, please contact Solicitor Ciaran Keane on 0117 929 4811 or email Or contact Head of Corporate and Commercial Services Marina Maclennan on 0117 929 4811 or email

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