covid banner

Selling a business: Share/business purchase agreement

Selling a business can be expensive, complicated and time-consuming, and may also have significant tax implications, so you need to plan carefully and get the right advice at an early stage. In this series of briefings, we will explain the full process of how to sell your business.

Share/business purchase agreement

This is the most important document in the transaction, and most of your solicitors’ time will be spent in reviewing and negotiating it. It will set out the key commercial terms which have been agreed between the parties, including:


If the sale is subject to any conditions – for example, obtaining the consent of a key customer to the transfer of its contract – these will be covered in the agreement and must be satisfied before the sale can complete.

Price and payment

The buyer normally pays the price in full on completion, but it may want to

  • hold back part of the price until a later date (a ‘deferred payment’)
  • make the price dependent upon the business achieving certain targets in the period after completion (an ‘earn-out’), and/or
  • hold back part of the price in a joint account to use in settling any problems which arise after completion (a “retention”)

You will need to decide whether to agree to this.

Completion accounts

The buyer may want the price to be dependent on the value of certain assets, such as stock, work in progress or debtors. These will be valued on completion using ‘completion accounts’, with the price being adjusted downwards or upwards if the value of the assets is lower or higher than the levels which the parties have agreed in advance.


On an asset sale, the parties will normally draw a line at completion, with the seller being responsible for all liabilities before completion, and the buyer responsible for those after completion. Pre-payments by or to the seller will also be divided pre- and post-completion.

For example, if you have already paid rent for a period after completion, the amount for the post-completion period will be added to the price the buyer will be paying, whereas if you have received a deposit from a customer for work to be done after completion, the deposit will be deducted from the price.

Book debts

The agreement will govern how book debts are collected after completion. In a share sale, the book debts are automatically inherited by the buyer but in an asset sale the buyer may not want to buy them (as it may not be able to collect them from customers after the sale), in which case you may have to keep them and collect them.

Alternatively, the agreement may provide that the buyer will collect them on your behalf, as it may not want you contacting customers for a period after completion.


On a share sale, the buyer automatically takes on any premises owned by the company but, on an asset sale, the agreement must specifically deal with the transfer of the premises, including obtaining the landlord’s consent if the property is leasehold.


On a share sale, the employees remain with the company which the buyer is acquiring. On an asset sale, the end result is similar in practice, as the regulations known as ‘TUPE’ provide that the employees’ contracts are transferred from the seller to the buyer on completion, so the employees become employed by the buyer.

As seller, you cannot dismiss employees immediately before completion if they are surplus to the buyer’s requirements going forward, and you must consult with the employees about the sale.

Restrictive covenants

The buyer will want to restrict you from competing with the business, and taking customers or employees after the sale. If you are planning to continue running a separate business, or starting a new business, after completion, you will need to check the restrictions carefully to make sure they do not prevent you from doing so.

Click here to read the full briefing series: Selling a business.

For more information or guidance, please get in touch with:

Peter Coats
Partner and Head of M&A
T. 020 7227 7441


This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.

Briefing tags , , ,