A more recent version of these Selling The Company notes – written by Cambridge And Oxilp And College Of Law students – is available here.
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Selling the Company Share Sales Share sales occur when a buyer purchases all of the shares of a company; the company will then be owned by the buyer. The transfer of the shares will be done using a Stock Transfer Form which is approved by the directors. The shares will be transferred when the register of member is updated. The consideration will be given straight to the selling shareholders. Using a share sale is advantageous for the seller as the seller can walk away from the business as all of their actual potential liabilities will have been purchased by the buyer. There are also tax exemptions for the seller. This is also a good sale for the buyer as the entire company is purchased which makes it simpler and causes less disturbance to the business on a day to day basis. There are also tax advantages for the buyer.
Asset Sales Assets sales occur when certain assets of the business are purchased (such as IP, contracts, property, debtors etc.) and certain assets are left behind (such as creditors, liabilities etc.). The consideration is then paid to the company. Using an asset sale is advantageous for the seller because they can sell underperforming or expensive assets or only sell part of the business such as new ventures. This is also beneficial for the buyer as they can 'cherry-pick' which assets they want to buy; there are also tax advantages for the buyer. Once the assets have been purchased by the buyer they will be transferred on completion. The company will then pay off any liabilities with the proceeds of sale leaving a 'cash-shell'. The company can then be wound up and the shareholders will share any remaining cash in the company. The employees of the seller will automatically transfer to the buyer by operation of law (TUPE). Contracts can either be novated (i.e. renewed with the consent of the third party) or assigned (i.e. only the benefit it transferred to the buyer, the burden remains with the seller).
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