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Selling A Privately Owned Limited Company Isn’t As Easy As Simply Walking Away - Jarmans Solicitors

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Selling A Privately Owned Limited Company Isn’t As Easy As Simply Walking Away

June 22, 2022 jarmans 0 Comments

Exit planning and time considerations when selling your business

Whether it’s because of retirement or moving on to a new venture, selling a privately owned limited company requires significant planning and preparation. You’ve built your business up, poured money, time, and resources into it, so when it comes to finally selling it, you should be ready to invest between 12 and 24 months of time to prepare it for sale.

Underestimating the time that it can take to get a business ready to be sold can potentially lead to financial and legal pitfalls later in the contract process. Jarmans Solicitors always recommend that any business owners who are considering selling their business create an advisory team made up of an accountant and a solicitor who can prepare your business for market.

An advisory team will create a detailed exit plan which considers the different sale options available, the tax implications, and relevant information that needs to be provided to potential buyers. This information has to be extremely detailed in order to ensure that once a sale has been completed, there is no chance of a claim of misrepresentation from the new owner.

Share sale and asset sale

The exit plan will also outline whether the sale is a share sale or an asset sale. A share sale essentially provides the shareholders with a clean break from the business. The buyer purchases the whole company as a going concern including its assets and liabilities. This means that there is no need for new contractual arrangements with employees, landlords, suppliers etc. Because the shareholding has been transferred, the business continues to operate in its current form.

The other option is an asset sale. In an asset sale the seller is the company itself, meaning that only assets and liabilities that have been identified can be involved in the sale. This can happen if the seller wants to retain parts of the business or the buyer wants to avoid certain liabilities. Because the business is being transferred to a different corporate entity, all third-party contracts will need to be renegotiated. This includes customer and supplier contracts and leases. Additionally, there would need to be employee consultation and TUPE may arise.

In making the decision between a share sale and an asset sale, it is crucial that your legal and accountancy teams are in communication with each other as there are complex tax implications related to both routes.

Once your limited company is ready to go to market, your legal team should draft non-disclosure agreements (NDAs) for potential buyers to ensure that confidential information is kept safe. They will also be best placed to undertake sale negotiations with potential buyers on your behalf.

Having an advisory team that works well together can significantly reduce the stress and worry connected to a business sale and can also improve the sale price. Jarmans Solicitors have experience in negotiating for and representing owners of businesses of all sizes. We also have excellent links to accountants across the south-east. If you are considering selling your business and would like to start planning for the next stage of your life, contact us to make an appointment.

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