Company Law: Sales of Shares and Assets

Question 1

True or false, when a partnership disposes of its business, it can do so by means of either a sale of assets or a sale of shares?

Answer 1

False

Question 2

True or false, the process for transferring ownership is simpler in a sale share than in a sale of assets?

Answer 2

True

Question 3

What is usually part of a due diligence exercise?

Answer 3

Pre-contract enquiries
An accountant’s report
Enquiries of third parties

Question 4

True or false, when a business is transferred to a new owner as a going concern as part of an asset sale, the employees’ employment contracts are also transferred?

Answer 4

True

Question 5

True or false, the transfer of undertakings (protection of employment) regulations only apply where there is a business disposal by share sale?

Answer 5

False, the TUPE regulations do not apply in the case of a share sale

Question 6

From a legal perspective, a sale of shares is effected by the vendor and purchaser making and completing a contract of sale. How must this contract be completed?

Answer 6

The purchaser’s name must be entered into the company’s share register and that of the vendor removed

Question 7

When do the TUPE rules not apply?

Answer 7

A sale of a business by share transfer, after which all the employees will remain in their current roles

Question 8

Which one of the following is the most common remedy for a breach of warranty?

Answer 8

Damages

Question 9

The sale agreement also usually provides for limitations to and exclusions from the warranties and indemnities. When the agreement is made, the vendor is likely to provide a disclosure letter, what is this?

Answer 9

It sets out the facts and circumstances that might constitute breaches of warranties

Question 10

True or false, if a sole trader decides to sell their business to a rival competitor, they can make their staff redundant prior to the sale, provided that the purchaser agrees?

Answer 10

True

Question 11

Javid purchased the entire share capital of Fareeda Ltd from Ziggy. Ziggy had warranted that Fareeda Ltd had no bad debts.

It has subsequently come to light that the representations made by Ziggy were untrue.

What remedy does Javid have in this case?

Answer 11

Javid may bring an action against the vendor and either seek to rescind the contract or seek damages

Question 12

True or false, tax warranties protect the purchaser from an undisclosed problem in the business?

Answer 12

True

Question 13

True or false, tax warranties are more important in a sale of assets than in a share sale?

Answer 13

False