1.10 Business - Sale of a Business

Question 1

What happens in a share sale (entire issued share capital)?

Answer 1

1) SH sells entire Co to Buyer (SPA)
- Ownership of Co changes
- Subject to Articles + laws
- Drag rights > If maj SH wishes to sells > Min SH to sell too

2) Title transfer
- Beneficial title transfers
- Once recorded in Register of Members => Legal title transfers

3) Co’s duties
- Stock transfer form => HMRC for stamping (Within 30 days)
- Stamp duty payable (consideration > £1,000)
- Stamped stock form > Co
- UNLESS gift/divorce or marriage transfer/general legacy transfer

4) Transfer reported on next annual confirmation statement > CH

5) CGT applies > Chargeable gains
- UNLESS reliefs are available

6) Corporation tax applies > Purchase price

Question 2

What happens in an asset sale?

Answer 2

1) Co sells asset to Buyer
- Novation
- Assignment > Co subject to liabilities
- Ownership of asset (NOT Co) changes

2) TUPE 2006 applies
- Protect employees’ rights, transfer duties

3) SDLT applies > Property

4) VAT > Purchase price
- Asset was NOT transferred as ‘going concern’ (Buyer NOT continuing same business as Co)

5) Corporation tax applies > Purchase price
- Potential double charge (VAT + Corp tax)