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Key Considerations When Selling Your Business
Deciding to sell your business is a momentous and often complex decision. Once you’ve made the choice, it’s crucial to approach the process strategically to ensure a successful outcome. While seeking professional legal advice early on is vital, understanding some fundamental aspects in advance can greatly benefit your planning.
Share Sale or Asset Sale?
One of the first decisions to make is whether you’ll sell shares of the company or just the assets of the business.
- Share Sale: This involves transferring ownership of the company, including all its assets and liabilities, to the buyer.
- Asset Sale: Here, only specific assets of the business—such as property, equipment, intellectual property, or goodwill—are sold, leaving the original company and its liabilities with the seller.
Understanding Share Sales vs Asset Sales
The decision between a share sale and an asset sale is influenced by legal, financial, and commercial considerations for both parties.
Share Sale
In a share sale, the buyer typically acquires the entire company, including its assets, liabilities, and obligations. This allows the business to continue operating seamlessly.
Advantages for Sellers:
- Simplicity: the entire company is transferred, making the process less burdensome for the seller.
- Continuity: operations can continue uninterrupted, minimising disruptions for employees, customers and suppliers.
- Potential Tax Efficiency: selling shares is often more tax-efficient, particularly if you qualify for Business Asset Disposal Relief (BADR). Formerly known as Entrepreneurs’ Relief, BADR allows eligible sellers to benefit from a reduced capital gains tax rate when selling their business. It is important to seek advice from a qualified tax adviser to maximise any available reliefs.
Disadvantages for Sellers:
- Buyer’s Risk: buyers may demand extensive warranties and indemnities to offset the risk of inheriting unknown liabilities.
- Pricing Pressure: buyers might reduce their offer to account for potential liabilities within the company, impacting the overall sale value.
Asset Sale
In an asset sale, the buyer acquires only selected assets, allowing them to leave behind liabilities.
Advantages for Sellers:
- Flexibility: sellers can retain parts of the business they wish to keep or sell separately later.
- Buyer Appeal: the reduced risk for buyers can make the transition simpler and quicker to negotiate.
Disadvantages for Sellers:
- Tax Complexity: asset sales can be less tax-efficient, often leading to taxation at both corporate and shareholder levels.
- Practical Challenges: transferring individual assets such as property, contracts, or employees can involve time-consuming legal processes.
- Retained Responsibilities: sellers must manage remaining liabilities, wind up the company, and deal with any leftover debts or assets.
Conclusion
Selling your business is a significant milestone that required thorough planning and careful execution. Understanding whether a share sale or an asset sale suits your goals, addressing tax implications, and preparing your business for the market can help you achieve a smooth and financially rewarding exit.
At Quastels LLP, our Corporate Department is equipped with experienced legal advisors who provide tailored guidance and ensure your interests are protected at every stage of the transaction. Let us help you navigate this important journey with confidence and clarity.
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Quastels Advises Rainbowwave on the Sale of the Company to the Rainbowwave Employee Ownership Trust
We were delighted to advise the founders of Rainbowwave on the sale of the company to the Rainbowwave Employee Ownership Trust, marking an exciting new chapter for the global fashion agency and its team. The transaction was led by Partner Adam Convisser, who guided the sellers through the process from start to finish.
Employee Ownership Trusts are increasingly popular succession option for business owners looking to preserve their company’s legacy, reward their team, and foster a strong culture of collaboration and shared success. By moving to an employee-owned model, Rainbowwave is not only securing the future of the business, but also empowering its employees to share in that success.
Maria Lemos commented:
“We are incredibly grateful to Adam and the team for their calm, clear and expert guidance throughout the process. This was a significant milestone for us, and Adam’s advice at every stage gave us real confidence that our interests were protected and that the transaction was being handled with care and professionalism.”
Congratulations to the whole team at Rainbowwave!
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Quastels Advises the Stafford Collection on the Sale of Luxury Hotel & Michelin-Starred Restaurant, Northcote
Quastels LLP’s corporate team is pleased to have advised the Stafford Collection on the sale of Northcote, a luxury hotel and Michelin-starred restaurant in the Ribble Valley. The disposal marks a strategic milestone for the Stafford Collection as it concentrates on enhancing its flagship property, The Stafford London, and pursuing new growth opportunities.
The transaction was led by Adam Convisser, Marcus Rebuck and Nilam Davé from our corporate team.
This high-profile deal highlights Quastels’ deep expertise in the hospitality sector, where we regularly support clients on strategic acquisitions, disposals, and group restructurings. The sale of Northcote further strengthens our track record acting for premium brands and luxury operators in the UK and internationally.
A representative of the Stafford Collection commented:
“We are deeply grateful for the support provided by Quastels on this transaction. They were commercial, technically excellent, and completely aligned with our goals. Their deep understanding of the sector made all the difference.”
We are proud to have supported the Stafford Collection on this important transaction. It is a pleasure to work with a client that has such a clear vision for the future of luxury hospitality.
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