This guide has been prepared to provide an inexperienced buyer or seller with a brief overview of the various stages involved in the sale or purchase of a business in the UK through an asset sale.
This is a short summary of the process; a more detailed guide can be found here.
What is an asset sale?
When buying a business, as asset sale means the sale of the goodwill and assets comprising the business, rather than the sale of the shares in the company that owns and operates the business.
This guide has been prepared to provide an inexperienced buyer or seller with a brief overview of the various stages of buying or selling a UK company.
This is a short summary of the process; a more detailed guide can be found here.
Initially, the parties agree between themselves the basic terms of the deal (price, when it is paid, what is being acquired, etc).
- Advice from accountants is usually sought
- Agents or brokers may also be involved
- Lawyers are generally not instructed at this stage
- The buyer indirectly inherits all the assets and liabilities of the company
- All employees will remain with the company under their existing terms and conditions. The buyer will need to know what these are and to find out whether there are any potential problems with the employees
- The buyer needs to consider the premises from which the company trades – will the buyer want to keep the premises, and will they in fact remain available after the deal completes?
The sale of a business may be structured in one of two ways. The business may be transferred by a sale of the shares in the company which owns and operates the business (a share sale) or by the sale of the assets which are necessary for the continuance of the business (an asset sale). In an asset sale, the seller sells some or all of its assets to a purchaser. In a share sale, the shareholders of the company sell their shares in the company to a purchaser. Which is preferred will depend on all the circumstances and very often the buyer and seller will have different preferences. Generally, a seller will favour a share sale, whereas a buyer will prefer an asset sale.
This guide to buying or selling assets has been prepared to provide an inexperienced buyer or seller with a brief overview of the various stages involved in the sale or purchase of a business in the UK through an asset sale.
What is an Asset Sale?
In the context of buying a business, an asset sale means the sale of a business (usually as a going concern) by the sale of the goodwill and assets used in the business, rather than by a sale of the shares in the company that owns and operates the business.
This guide to buying or selling has been prepared to provide an inexperienced buyer or seller with a brief overview of the various stages of buying or selling a UK company.
The first stage that the parties to a deal will usually go through simply involves the early negotiation of the most basic terms of the deal. Sometimes the parties will negotiate direct with each other; or they may go through an agent or broker. It is unlikely that lawyers will be involved at this stage.
Starting a new business is very time consuming, especially if the UK is new to you, with different rules and regulations. Dixcart Legal Limited (Dixcart Legal) can assist with your legal requirements in a seamless way (as well as providing access to tax, IT, and payroll teams if required) so that you can focus your time on building your business.
Set out in this brief note are issues to consider when starting up a business, along with some summary information to get you started.
ISSUES TO CONSIDER BEFORE YOU SET UP A BUSINESS
- Where do I want to sell my products/services?
- Do I want to form an establishment in the UK or do I want to appoint a third party, such as an agent, initially?
- What is the cost of establishing a company in the UK?
- If I do want to set up a business in the UK, what sort of legal structure do I require?
- Sole Trader?
- Limited Liability Partnership?
- Limited Liability Company?
- Which documents need to be in place?
- What rules and regulations do I need to comply with?
- Do I need to register for VAT?
- What do I need to do before I start trading?
- What do I need to do once I start trading?
- Are there any tax reliefs available to me?
- Do I need a property? If so:-
- How long do I want to be there?
- Do I want to occupy it under a lease, a serviced office or licence arrangement?
- How am I going to finance it?
- What liabilities am I facing?
- Which documents should be in place?
- Do I need a registered office?
- What name can I use for my business?
- Are there any restrictions on the name I choose?
- How do I carry out a search to check the name is not already being used by another business?
- Do I need personnel? If so:-
- Do I need Employees? Consultants?
- Will employees from overseas be working in the UK?
- How will they be paid?
- Do I need payroll services?
- Do I need to think about immigration rules?
- What level of insurance should I have in place?
- How am I going to fund the new venture?
- Am I taking a loan from someone?
- Which documents do I need to put in place?
- Am I giving security or personal guarantees for the loan?
- Am I granting share options?
- How do I protect my business in general?
- Do I have a strategy in place for losses due to fire, flood, power shortages, strikes, snow, volcanic ash, road closures etc.?
- What is the most valuable part of my business and how do I protect it?
- Do I need a website?
- What are cookies on a website?
- What is data protection?
- Who owns the website?
- Do I need a software system?
- Who owns the system?
- Are any third parties such as brand consultants/advertising agents assisting me? If so, what protection do I have and who owns what?
In short, we understand that there are a lot of issues to consider. We set out below some summary information to get you started, as well as how we can help.
1. What legal structures are available?
This should be one of the first things you consider. This decision affects the tax and national insurance contribution requirements, HMRC reporting obligations, the liability attached to the business and the documents you need to have in place.
There are four widely used forms of business structure in the UK. They are summarised in the table below.
The structure that is right for you will depend on your business. There are advantages and disadvantages to each. Dixcart Legal can assist you in making the right decision.
2. Regulations when setting up a Business in the UK
The choice of the legal structure will determine which regulations will apply to your business. For example, in the case of a limited company, a number of documents and information, such as the articles, the name of the company, the names of the directors and the names of the shareholders need to be registered at Companies House. In addition various statutory filings must be complied with and the company must create and maintain statutory books.
Do you wish to engage a consultant, an employee (the two most common engagements) or a person in some other capacity?
An employee is an individual who works under a contract of employment, which, in turn, means that the individual agrees to serve the employer. A consultant is a self-employed individual working under a contract, who agrees to provide certain services to the employer. The question of whether someone is an employee or a consultant is a mixed question of fact and law.
The key issues to consider when hiring are: cost, equal opportunities/discrimination and immigration.
The principal costs for an employer when hiring employees (other than the usual costs involved in training and setting up a new employee in the business) are the base salary, pension contributions due to auto enrolment (provided that the staging date has been reached) and employer national insurance contributions. You may also choose to provide other benefits in order to attract the appropriate talent to your business.
When recruiting you should also consider potential employment law claims to which the employee may become entitled during recruitment and during and after employment. For example, discrimination rules affect how you word a reference and the questions you can ask during recruitment.
Employers must also observe immigration and visa requirements. The documents that need to be obtained will depend on the individual’s circumstances. However in each case an employer must always check original documents before employing individuals to verify that they can work in the UK.
If you are engaging an employee you must provide a statement of terms of employment within the first two months of employment. The statement of terms of employment must contain specific information.
The above issues are just a few of the considerations to take into account and are by no means exhaustive.
How we can help you
Dixcart Legal Limited provides legal solutions and assistance to the business community in the UK and worldwide. We can:-
- advise on ways to protect your business and ideas, including drafting:-
- bonus arrangements;
- restrictive covenants;
- confidentiality agreements;
- draft consultancy agreements and agency agreements;
- draft director service agreements, contracts of employment and appropriate policies and procedures for employment;
- draft terms and conditions to be used for your clients and suppliers;
- form and incorporate your company, advise on the structure, prepare/amend the articles of association, draft a shareholders agreement and advise on the legal mechanics of running a company day to day, draft and advise on a partnership or LLP agreement, form and incorporate a LLP and also provide company secretarial services;
- assist with the purchase or sale of property and associated matters, including advising on:
- change of use of a property;
- dilapidations claims;
- landlord and tenant issues;
- lease renewals;
- mortgage documentation;
- rent reviews;
- terminations, sub-leases etc.
Dixcart Legal can also offer access to other services, including:
- management and control of companies in the UK;
- payroll services;
- assistance with detailed pension arrangements;
- immigration issues.
Morgan Russell LLP Transferred to Dixcart Legal Limited on 1st May 2014
As from 1st May 2014, the business of Morgan Russell LLP (“Morgan Russell”) transferred to Dixcart Legal Limited (“Dixcart Legal”).
The partners at Morgan Russell worked together with international business advisors, Dixcart International Limited, to establish Dixcart Legal which is an Alternative Business Structure (“ABS”) regulated by the Solicitors Regulation Authority and the successor practice to Morgan Russell. Dixcart Legal is a subsidiary of Dixcart International Limited.
The ABS structure enables lawyers and non-lawyers to work together for the first time, allowing flexibility in terms of organisation and management.
The professional services available from Hillbrow House go beyond those provided by our fully regulated solicitors at Dixcart Legal and include the services available through Dixcart International. This can be of particular advantage to businesses entering the Western European market and/or operating in the UK for the first time.
All of the Morgan Russell lawyers and staff have joined Dixcart Legal and the professionals providing legal services, remain as prior to 1st May. The difference is that we have more resources for you to utilise; but only if you wish to do so.
We remain at our previous address at Hillbrow House in Esher, opposite Sandown Race Course and have the same phone number: 01372 461411.
Our Dixcart Legal website demonstrates the depth of commercial services (previously provided by Morgan Russell) that will continue to be available from Dixcart Legal.
Key Contact: Mel Smith
Post Contract Matters
This is the last of a series of Briefing Notes covering aspects of English Contract Law which we feel are of relevance to business people.
The previous Briefing Notes covered matters relating to the formation, negotiation and contents of contracts.
This last Briefing Note deals with post contract matters including : contract risk management; consequences of a breach of contracts; and a brief summary of the contract dispute resolution process.
Contract Drafting and Contract Provisions
This is the fourth of a series of five Briefing Notes covering aspects of English Contract Law which we feel are of relevance to business people. The previous Briefing Notes dealt primarily with how contracts are formed and some pitfalls and key issues regarding contract negotiations.
This fourth Briefing Note deals with matters relating to the drafting of contracts themselves. Whilst there is some legislation governing and implying contract terms (e.g. “Sales of Goods and Services Acts”) in the main English Courts are reluctant to infer provisions which the parties have failed to consider or cover in the actual contract terms; whether the contract be in a single written agreement, construed from a chain of emails, or purely oral. Many contract disputes would not have arisen had the parties considered the point in issue and covered this in the contract.
This Briefing Note includes a checklist of some tips on contract drafting and lists some important contract provisions.
Contract Negotiation and some Protection Measures - continued
This is the third of a series of five Briefing Notes covering aspects of English Contract Law which we feel are of relevance to business people. Note (2) covered some of the major pitfalls that a business needs to avoid during contract negotiations. This Note (3) is a continuation of Note (2) and highlights some of the key issues your business should consider during contract negotiations.