Share Sale

In a share sale the buyer will acquire all of the shares in the company, with the company as a legal entity remaining the same. The business will continue trading normally with the buyer, as the new owner, acquiring the whole company including all assets and liabilities. However, the seller will be required to provide extensive warranties and indemnities, giving protection to the buyer against specific risks / liabilities.

There are benefits and drawbacks in a share sale. The benefits are that contracts will usually continue in effect, each asset does not have to be individually sold which can cut down on potential taxes (such as stamp duty for example) and employees will transfer automatically.

The drawbacks are that the selling shareholders will need to agree and consent to the sale and provide extensive warranties and indemnities, an audit will be needed to ensure that existing contracts do not contain change of control provisions requiring consent, there may be capital gains tax to pay and the due diligence required pre-sale can be a lengthy and difficult process.