Buying or selling a business
At BBS Law we have a wealth of experience in advising both sellers and buyers on business sales.
Buying or selling a business is an alternative to buying or selling a company. It involves the buyer purchasing certain assets and rights, and sometimes assuming certain liabilities, of a seller’s business. On the sale of a business (also called an asset sale) the seller is the person(s) or entity that owns the business, be it a company, sole trader, partnership or LLP.
An asset sale is the only method by which a buyer can acquire the business of an unincorporated body such as a partnership or sole trader which does not have shareholders or other members. It is also the method by which a corporate body can sell part of its business.
An asset sale often gives greater flexibility to a buyer than a share sale as it can, subject to the strength of its negotiating position, pick and choose the assets it wishes to take and, subject to limited exceptions, the liabilities (if any) for which it agrees to assume liability, leaving the remaining assets and liabilities with the seller.
The issues to consider on an asset sale are similar to those on a share sale. However, the ability of a buyer generally to choose which liabilities it takes over means that the level of risk for a buyer will generally be lower where the business (rather than the company) is being acquired Accordingly, a buyer is often prepared to accept a lower level of due diligence and less extensive warranties and indemnities on a business sale than on a share sale and will not require a tax covenant as it will not generally be responsible for any historic tax liabilities of the seller in relation to the business.
Having said this, a business purchase is generally more complex to document and implement than a share purchase. A business sale involves the seller and the buyer agreeing what assets and liabilities are to be transferred to the buyer to take over the running of the business and documenting this in the business purchase agreement. Often transfers of the individual assets such as property, contracts or licences are required and third-party consents might be necessary to the transfer of these assets.
In addition, on an asset sale, the employees of the business will automatically transfer to the buyer under the Transfer of Undertakings (Protection of Employment) Regulations 2006. These regulations are complex and wide ranging and need to be considered before any business sale is undertaken. At BBS Law, our employment specialists will work alongside our corporate team to ensure that you are fully advised on all employment issues arising in relation to your sale or purchase.