Sale of a Business
Business Sale Purchase Agreements are in two main forms. One is for a sale of assets (our document A147), the other for a sale of shares (A186). We also have a form for use where one shareholder sells all their shares in the business to the other shareholder (A131).
An asset sale is suitable when a business owned by a sole trader or partnership is being sold. The principles are quite simple: the assets of the business are sold for an agreed price and the Sale & Purchase Agreement (the SPA) will identify the assets that are being sold – not only physical stock and equipment but intangibles such as goodwill and the existing contracts with suppliers and customers, customer lists etc. Business premises and the employees may also be included.
For a share sale, where the business is a limited company, the structure is technically simpler – the owners of all the shares in the company agree to sell their shares to the purchasers for an agreed price. The assets do not need to be identified in the Agreement in the same way as an asset sale as they belong to the company that is being sold.
In both cases of Business Sale Purchase Agreements, the buyers will need to undertake due diligence to satisfy themselves of the value and to see that there are no hidden liabilities. This will involve inspection of records by the buyer and accountants and lawyers are usually involved.