Transfer of Shares
Principal issues include:
Continuity
A change in the ownership of the target effected by a sale of its shares does not generally interrupt the company's business; its contracts with customers and suppliers remain in place, as do those with its employees, and its ownership of its assets is unaffected.
Simplicity
Because the company continues as a separate entity, there is no need to deal with a number of third parties, such as landlords, debtors and customers, to seek their consent to the assignment of individual assets such as leases, debts and contracts.
Direct receipt of consideration
The payment for the sale of shares goes straight into the hands of the selling shareholders. With a business sale, the payment is to the selling company and it then has to make some form of distribution to get the proceeds into the hands of its shareholders.
Tax on capital gains
A number of tax reliefs are possible on a share sale, such as taper relief, holdover relief, rollover relief, reinvestment relief and the substantial shareholding exemption. These will often be central to the decision as to what type of transaction the parties are willing to agree to.
Employees
The company's contracts of employment with its employees will not be affected by a share sale. In a business sale much the same result is achieved but by operation of the Transfer of Undertakings Regulations, although in practice they can be wearisome both in complying with the consultation requirements and because of their inconsistent interpretation by the courts.
Stamp duty
The rate of duty applying on a transfer of shares is 0.5%. On a business transfer a maximum rate of 4% applies to a transfer of property assets.
Regulated activities
With a share sale the advisors need to consider whether advice provided constitutes a regulated activity and whether the promotion of a share sale is subject to the legal controls on financial promotions.
Financial assistance
A company may not give financial assistance in connection with the acquisition of its shares (subject to an exemption in specified circumstances for private companies).
Continuity
A change in the ownership of the target effected by a sale of its shares does not generally interrupt the company's business; its contracts with customers and suppliers remain in place, as do those with its employees, and its ownership of its assets is unaffected.
Simplicity
Because the company continues as a separate entity, there is no need to deal with a number of third parties, such as landlords, debtors and customers, to seek their consent to the assignment of individual assets such as leases, debts and contracts.
Direct receipt of consideration
The payment for the sale of shares goes straight into the hands of the selling shareholders. With a business sale, the payment is to the selling company and it then has to make some form of distribution to get the proceeds into the hands of its shareholders.
Tax on capital gains
A number of tax reliefs are possible on a share sale, such as taper relief, holdover relief, rollover relief, reinvestment relief and the substantial shareholding exemption. These will often be central to the decision as to what type of transaction the parties are willing to agree to.
Employees
The company's contracts of employment with its employees will not be affected by a share sale. In a business sale much the same result is achieved but by operation of the Transfer of Undertakings Regulations, although in practice they can be wearisome both in complying with the consultation requirements and because of their inconsistent interpretation by the courts.
Stamp duty
The rate of duty applying on a transfer of shares is 0.5%. On a business transfer a maximum rate of 4% applies to a transfer of property assets.
Regulated activities
With a share sale the advisors need to consider whether advice provided constitutes a regulated activity and whether the promotion of a share sale is subject to the legal controls on financial promotions.
Financial assistance
A company may not give financial assistance in connection with the acquisition of its shares (subject to an exemption in specified circumstances for private companies).