Share Sale vs Asset Sale

The most common way to exit a business is to sell it. Whether you’ve been planning to sell your business or just want to retire, it’s important to plan ahead so you can get the best price and avoid unnecessary stress, as selling a business can be time-consuming and complicated.

Below are the different ways and possible implications of selling a business.

Different ways to sell a business

You can choose to sell company shares or company assets when it comes to selling a private limited company (other types of businesses will be discussed later).

A share sale involves the buyer acquiring all of the company’s shares, and the company continues to operate as usual with the buyer as the new owner. On the other hand, asset sales involve the buyer acquiring all or some of the company’s assets. The target company usually dissolves after the transaction.

Things to consider before choosing the suitable option:

  • As the seller, do you own the property or is it on lease? What other assets (such as trademarks and patents or customer lists) that belong to the business are for sale, and what assets do you prefer to keep after the sale?
  • Is there a professional appraisal of your business?
  • Are the business records up-to-date, and have you recently performed important internal administrative work, such as property maintenance and stocktaking?
  • Are you on good terms with the bank, are your payments and other liabilities (such as taxes) up-to-date, and how much is pending and settled?
  • Have you taken advice on possible tax implications on structuring your transaction?

In addition to obtaining a professional valuation, consider hiring an intermediary, accountant and lawyer early in the process, so they can advise you on the best way to structure the deal, and the best timing to market. You also need to carefully consider the tax implications of selling company shares versus selling company assets, in order to make the right choice.

Share Sale

When you sell a company’s shares to a buyer, the new owner gets the entire company, including all its assets and liabilities (property, employees, contracts, etc.). it would be a complete separation of you and the company, also save you from hassles of dealing with each asset.

On the other hand, buyers of company (shares) will require extensive warranties and indemnifications in the sale and purchase agreement against any risks inherent in the bundling of assets and liabilities included in the sale.

Advantages of a share sale – from a seller’s perspective:

  • Since the owner of the asset (the company itself) remains the same after the sale, you don’t have to transfer every asset (if it’s a freehold or long-term lease), or deal with the landlord (if it’s a shorter commercial lease) and obtain consent (and possibly pay an administration fee).
  • You can keep the details of the company’s sale private, at least in the early stages. You don’t need to tell customers and employees that you are thinking to sell the business, so as to reduce the stress and anxiety that might arise.
  • Any existing contracts you have as a supplier or buyer will generally survive the sale.
  • Staff are automatically transferred, as a result there is no obligation to consult with employees.
  • The seller achieved a clean detachment with the company and any liability.


  • At the time of the sale, the sale and purchase agreement will contain warranties and indemnities in the buyer’s favour, so any liabilities that arise after the sale, or that cannot be accurately quantified at the time of sale (such as a pending lawsuit), will be the seller’s responsibility. These negotiations can be time-consuming and complex.
  • The due diligence process – which requires an assessment of the extent of the company’s pre-sale assets and liabilities – can drag on and you may need to set up a data centre with all the relevant documents and records.
  • You will need to review all of the company’s contracts to see if they contain change-of-control clauses that require you to obtain the consent of the other party to sell your shares.
  • Shareholders may be subject to profits tax on any profits you make while owning the shares.
  • All the shareholders must agree to the sale.

In an asset sale (the sale of company assets other than shares), the sale process is less risky for the buyer. The buyer (or buyers) would take ownership of the company assets, making the company a “shell”, which would then close after the sale.

Which assets to buy depends on the contract between the buyer and the seller will dictate the assets to be traded. The following are the most common items to be included in an asset sale transaction:

  • Customer records
  • Plant and Machinery
  • Equipment
  • License
  • Furnish / Renovation
  • Inventory
  • Business contract
  • Intellectual property
  • IT systems and software
  • Trademark
  • Exclusivity

Advantages of asset sales:

  • The buyer can choose which assets to be included in the transaction, and can leave some assets behind.
  • Rights and responsibilities come with each asset and can be more accurately assessed. As a result, transaction risk to the buyer is reduced, the time and expense of negotiating complex warranties and indemnities will therefore be reduced.
  • The due diligence process can be shorter and less involved than selling company shares.


  • A third-party service provider is normally engaged in assisting business closure and asset transfer. The normal business operations will be impact during the transition.
  • Need to renegotiate the terms of retention of existing employees.
  • Contracts with suppliers and customers are not automatically transferred. They must be negotiated separately.
  • The property title or lease for each of your business premises will be transferred separately, requiring separate documentations and negotiations.

Selling Different Types of Companies

Although selling a private limited company is the most common form of business sale, let’s also take a quick look at the selling process for two other types of organizations – Unlimited Companies and Public Limited Companies.

Unlimited Company

If you are running your business as an unlimited company, whether it is a sole proprietorship or a partnership, selling the business will imply selling assets rather than shares.

Selling a partnership can be more complicated than selling a limited company because assets may be held by different partners, who may have different identities. For this reason, some entrepreneurs decide to consolidate their holdings before the transaction, so that the deal goes smoothly.

When you sell a partnership, you need to consider the following questions:

  • Who owns each asset group? Consider each asset class separately, such as property, goodwill, intellectual property, etc.
  • How are the shares of the partnership divided and how are the benefits shared? This may affect the realized gains of the deal.
  • Will all existing partners exit the business, or will they remain in business?

Public Limited Company (PLC)

Because the public also can buy and sell shares of PLCs, PLCs are subject to the regulatory framework that governs how these shares are traded.

There are six general principles that apply to its shares trading:

  1. When purchasing shares, all individuals holding PLC shares must be treated equally. If the buyer acquires a controlling number of shares in the PLC, the rights to minority shares must be protected.
  2. All shareholders must be given sufficient time and information to enable them to make an informed choice about whether to sell their shares.
  3. The PLC’s board must consider the best interests of the company and let individual shareholders decide whether a bid is sufficient.
  4. The PLC stock market must not be manipulated in any way that could create a false market.
  5. Bidders for PLC shares must ensure that they are able to pay the bidding fee.
  6. The PLC acting as a tender must be able to conduct business normally, taking into account any pending tenders for its shares.

The main differences between selling a PLC and a private limited company are:

  • Buyers of PLC shares will not receive the same types of warranties and indemnities as private sales.
  • The due diligence process for selling a PLC may not be as detailed and quick compared to selling a private limited company.
  • For PLCs, private exclusivity arrangements (where specific buyers are given a right of first refusal) are less likely as these are prohibited by the code.
  • Purchasers of PLC shares generally cannot impose conditions on their offer to purchase shares.
  • The buyer needs to determine the purchase price before the transaction, including a fully committed bank loan (if applicable).
  • All sellers of PLC stock need to be treated equally, with no one offering preferential prices or other special arrangements.
  • Once the purchase of shares in PLC is officially announced, the buyer is obliged to enter the offer stage. Confidentiality until the offer is announced so as not to affect the trading of PLC shares.
  • When an acquisition is announced, details of the nature of the offer and the identity of the offeror must be sent to the PLC’s shareholders. In the case of a contractual takeover offer, a bidder who successfully acquires a percentage of the PLC may be able to compel the acquisition of a minority stake in the remaining company. If a proposed takeover fails, bidders are often blocked from bidding again for at least a year.

Sometimes buying PLC stock increases their holdings in the target company before or during the offer process. Detailed legal advice should be taken to avoid the danger of insider trading claims, or the establishment of a stake that would result in the buyer acquiring 30% or more of the total voting power, as special rules apply to such incremental purchases.

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