Share and Asset Purchase
When buying a business, there are effectively two methods available to complete the sale: an asset purchase or a share purchase.
An asset purchase involves the purchase of some or all of the assets owned by business ranging from fixed assets, land and buildings to machinery, stock and intangibles such as goodwill and intellectual property. Usually, the assets are specifically identified in the sale and purchase agreement and assigned an economic value within the sale.
A share purchase is slightly more complex than a purchase of business assets, because the shares also come with a range of potential liabilities, many of which may not be evident upon the balance sheet of the business.
In certain cases the share value may be determined on the basis of the expected future earnings of the business rather than the underlying market value of the assets or liabilities as purchased at the point of sale.
Where a purchaser acquires 100% of the shares in an entity, the purchaser also takes control of the business’ assets and liabilities.
Regardless of whether the transaction is structured as an asset purchase or a share purchase it is essential to ensure that both the seller and the purchaser know what they are in for – to ensure there are no unpleasant surprises following the handover.
Usually there will be a process of negotiation as warranties are agreed, in addition to the main parts of the deal, and disclosures about potential breaches of those warranties are made by the seller.
In addition, the sale, regardless of how it is conducted, will almost certainly require specific tax and related financial advice on asset protection and succession.
It would be unwise in the extreme to enter into such a major financial undertaking without either legal advice or the undertaking of proper due diligence.
Our team can advise in all aspects of a sale or transfer of ownership with an emphasis on personal risk management.
Share and Asset Purchase Solicitors in Edinburgh, Wick and Aberdeen
If you need help turning round your company’s fortunes or bringing your business to an end, call us. We help clients in Edinburgh, Wick, Caithness, the Highlands, Inverness and throughout Scotland rescue their business.
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