Morgan Russell Solicitors

Share and Asset Sales and Purchases

Share and Asset Sales and Purchases

Preparing a Company or Business for Sale

1.         INTRODUCTION

This article covers some of the key issues which need to be considered when selling a company or a business. People often say they are selling but do not know how the transaction is to be structured, e.g. by selling the shares in the company (a share sale) or by the company selling the business and assets of the business (an asset sale). From a due diligence viewpoint the issues are similar, save where indicated below.

In addition to this article, which gives an overview, please also see the separate notes “Asset Sale v Share Sale”, “Buying or Selling a Company”, “Buying or Selling a Business” and “Advantages of using Heads of Terms".

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Pre-Packs

What is a pre-pack?

A pre-pack is the name given to an arrangement under which the sale of all or part of a company’s business or assets is negotiated with a purchaser before the appointment of an administrator.  The sale is completed by the administrator shortly after their appointment.  This reverses the standard process, where the administrators start marketing the business after they have been appointed.  The purchaser may be a competitor or, as is often the case, the existing management team.

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A Guide to Buying or Selling a Company

This guide to buying or selling has been prepared to give an inexperienced seller or buyer a brief overview of the various stages of buying or selling a UK company.

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Asset Sale v Share Sale

If you acquire a business it may be purchased in one of two ways. You may acquire the business by buying the company which owns and operates the business (a share sale) or you may buy the assets which are necessary for the continuance of the business (an asset sale). In an asset sale a company 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 best for you will depend on your circumstances. 

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A Guide to Distribution Agreements

This guide will consider the following:

  1. The Nature of Distributions Agreements;
  2. Types of Distribution Agreements;
  3. Tax Issues;
  4. The Law and Distributions Agreements; and
  5. Common Terms in Distribution Agreements.

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A Guide to Buying or Selling Assets

This guide to buying or selling assets has been prepared to give an inexperienced seller or buyer a brief overview of the various stages to be gone through in selling or buying assets of a UK company necessary for the continuance of the business. In addition to the physical assets, the buyer usually also buys the goodwill of the seller. Goodwill is an intangible asset representing the name and reputation of the seller.

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Advantages of using Heads of Terms

It is advantageous for companies to use Heads of Terms both when selling or purchasing a business or when selling or purchasing shares.  Heads of Terms are also commonly referred to as "Heads of Agreement" or a “Memorandum of Understanding" (MOU).

What are Heads of Terms

Heads of Terms outline the main feature of a proposed contract and provide both parties with a synopsis of the essence of the contract and how it would look in a final lengthy binding form.  To obtain a specimen Heads of Terms for business sale and purchase and/or for share sale and purchase do not hesitate to telephone us and we will provide outline drafts.  Although they cover many of the usual commercial terms they will always need adjusting for each particular deal.

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