Selling a Business in the UK: A Legal Guide for Owners

Selling a business in the UK is a private contractual transaction, and almost every protection you end up with comes from the agreement you sign rather than from the general law. There is no statutory code that guarantees a seller a clean exit: a company sale is governed by the share purchase agreement, a business and assets sale by the asset purchase agreement, and the buyer’s remedies against you personally can run for years after the money has cleared.

That is the single most important thing for an owner to understand before starting. The price is agreed early and rarely moves much. What is negotiated for the following three to six months is risk: who carries it, for how long, and up to what financial limit. Sellers who treat the legal phase as paperwork to be got through at the end routinely accept liability they did not need to accept, and discover it only when a claim arrives eighteen months later.

We act for both buyers and sellers on owner-managed business and SME transactions, including professional practices such as dental practices, GP surgeries, pharmacies, care homes and veterinary practices. This guide sets out the legal position across a full sale, from preparation through to the obligations that survive completion, and points to the detailed guidance on each stage. If you want to talk about a specific sale, our selling a business solicitors deal with these transactions every week.

Share sale or asset sale: the decision that shapes everything else

Every other question in a sale follows from this one. In a share sale you sell the shares in the company, and the company continues to own its assets, contracts, employees, premises and liabilities exactly as before. In an asset sale the company sells selected assets and the buyer picks up only what is listed in the agreement, leaving the company (and usually its historic liabilities) with you.

Sellers almost always prefer a share sale, because it is a clean break: the liabilities go with the company. Buyers almost always prefer an asset sale, because they can leave the unknown problems behind. Where the deal lands is a commercial negotiation, but it is one with real legal and tax consequences, and it needs to be settled in the heads of terms rather than revisited later.

The double tax charge in the final row is the reason most owner-managed sales are structured as share sales. If the company sells the assets, the company pays corporation tax on its gains, and the shareholders then pay again when the cash is taken out by dividend or on a liquidation. We look at the full comparison, including the circumstances where an asset sale is genuinely better for a seller, in our guide to share sale versus asset sale.

If you are a sole trader or a partnership rather than a limited company, the choice does not arise: there are no shares to sell, so the transaction is necessarily an asset sale, and the partnership or sole trade is the seller. The same is true of most traditional professional practices that have never incorporated.

The legal timeline of a business sale

Owners consistently underestimate how long a sale takes, and almost always underestimate the preparation phase rather than the deal phase. The ranges below reflect what we see on owner-managed and SME transactions. A straightforward sale to a known buyer can run faster; a regulated business, a sale involving several shareholders, or one where due diligence uncovers problems will run considerably longer.

On a typical owner-managed sale, six to nine months from first serious approach to completion is a realistic expectation, with preparation starting before that. We set out what drives the variation, and the specific things that add weeks, in how long it takes to sell a business.

Preparing to sell: vendor due diligence and the problems worth fixing first

The most valuable legal work in a sale happens before a buyer is ever involved. A buyer’s solicitor will find every defect in your corporate records, your contracts and your employment documentation, and will price each one as a risk. Problems found by your own advisers months ahead can usually be fixed. The same problems found by the buyer during due diligence become a price reduction, a specific indemnity, or a retention held back from your proceeds.

The issues we see most often on owner-managed businesses, in rough order of how much they cost sellers, are:

• Defective share ownership. Share transfers never documented, stock transfer forms never stamped, a leaver’s shares never bought back, or option grants that were agreed verbally and never implemented. If the buyer cannot be satisfied you own what you are selling, nothing else matters.
• Out of date statutory registers. The register of members, the register of directors and the people with significant control register are the legal record of ownership. Where they do not match Companies House filings, the discrepancy has to be reconstructed and corrected, which takes time.
• Key contracts that are not in writing. Long-standing customer and supplier arrangements running on an exchange of emails, or on terms that expired years ago. A buyer paying for recurring revenue wants to see the contract that produces it.
• Change of control clauses. Clauses allowing a customer, supplier, landlord or lender to terminate if the company’s ownership changes. These need to be identified early, because the consent conversation can take longer than the rest of the deal.
• Employment documentation gaps. Missing written statements of particulars, staff treated as self-employed contractors who are arguably employees, and unenforced or unenforceable restrictive covenants in senior employees’ contracts.
• Intellectual property owned by the wrong person. Software, designs, branding or content created by a founder personally, or by a contractor whose agreement never assigned the rights to the company.
• Property title and lease problems. Unregistered title, missing consents for alterations, or a lease that has fallen into a periodic tenancy without anyone noticing.

Running this exercise yourself before marketing is known as vendor due diligence, and for most owner-managed businesses it is the highest return legal spend in the whole process. Our guide to vendor due diligence and preparing your business for sale sets out what to review and in what order.

Where there is more than one shareholder, the shareholders’ agreement and the articles need checking at this point too. Pre-emption rights, drag along and tag along provisions and consent thresholds all determine whether you can actually deliver 100 per cent of the shares, and whether a minority shareholder can hold the deal up. The equivalent review for a partnership is of the partnership deed, and we cover that on our partnership agreements page.

Confidentiality, heads of terms and exclusivity

Nothing commercially sensitive should leave your business before a non-disclosure agreement is signed. That means customer lists, pricing, margins, supplier terms and employee details, and it applies to approaches from competitors and from trade buyers in particular. A sale that does not complete still leaves the other side holding everything you disclosed, so the NDA should restrict use as well as disclosure, and should include a non-solicitation undertaking covering your staff and customers.

Heads of terms are the written outline of the deal, usually two to six pages, agreed once a buyer is serious. They are expressed as not legally binding, with specific exceptions, and that distinction is the point to get right. The commercial terms, including price, structure and earn-out principles, are non-binding and either side can walk away. A small number of clauses bind from signature and should be read carefully:

• Confidentiality, which carries forward or restates the NDA.
• Exclusivity, a period during which you agree not to negotiate with anyone else. This is a genuine commitment and a breach can give rise to a damages claim.
• Costs, dealing with who pays what if the deal does not complete, including any break fee.
• Governing law and jurisdiction.

Although heads of terms are mostly non-binding, in practice they set the negotiating baseline for everything that follows. Issues left vague, such as whether the price is on a cash-free debt-free basis, whether there is a retention, or how an earn-out is measured, get resolved later against a buyer who has by then spent money on due diligence and has more leverage than you do. Time spent making heads of terms specific is time that does not have to be spent arguing in month four. We cover the drafting points in detail in our guide to heads of terms for a business sale.

On exclusivity, length matters. Too short and the buyer cannot complete due diligence, so you will be asked to extend from a weaker position. Too long and you are locked out of the market while a buyer who may never complete takes its time. Six to ten weeks, with an extension only by agreement, is a common landing point for an SME transaction.

The buyer’s due diligence and how to run it

Due diligence is the buyer’s investigation of what it is buying, and it runs across three strands: legal, financial and commercial. The legal strand is a questionnaire, often running to several hundred questions, covering corporate records, contracts, employees, property, intellectual property, data protection, litigation, insurance and regulatory compliance. You answer it by uploading documents to a data room and by giving written replies.

Two things about this stage are worth understanding before you start. The first is that in a share sale the buyer is inheriting everything, so the enquiries are far wider than in an asset sale, where only the listed assets matter. The second is that your due diligence replies are not a neutral exercise. They feed directly into the disclosure letter, and what you disclose is what you cannot later be sued on. Replies given casually, or by a member of staff without legal review, create problems that surface much later.

Practical discipline that saves sellers money:

• Answer accurately rather than favourably. An inaccurate reply is a warranty breach waiting to happen, and the disclosure letter cannot cure a positive misstatement.
• Keep a complete record of everything placed in the data room, with dates. The disclosure letter will usually say that everything in the data room is disclosed, and you need to be able to prove what was in it.
• Route every reply through one person. Inconsistent answers from different managers are the most common source of late-stage disputes.
• Keep the process confidential internally for as long as sensibly possible. Staff and customers learning about a sale from the wrong direction causes real commercial damage.

Buyers coming at this from the other side can read our companion guide on buying a business, and we act for acquirers as often as we act for sellers.

The sale agreement: what you are actually signing

The sale agreement is the central document and on an SME transaction it will commonly run to sixty pages or more, with the warranty schedule accounting for a large part of it. It is worth knowing how it is built, because the structure is the same in almost every deal.

Share purchase agreement

A share purchase agreement records the sale of the shares and typically contains the price and how it is paid, any conditions to be satisfied before completion, the completion mechanics, the warranties given by the sellers, the limitations on those warranties, a tax covenant, restrictive covenants, and provisions on confidentiality and announcements. Where there are several shareholders, it will also deal with whether their liability is several (each liable only for their own share) or joint and several (each liable for the whole), and that distinction matters enormously if one of your fellow shareholders later becomes insolvent. Our explainer on what a share purchase agreement is goes through each schedule in turn.

Asset purchase agreement

An asset purchase agreement does a different job: rather than transferring one thing, it has to identify and transfer each asset individually, allocate the price between them, state which liabilities are being assumed and which are not, and deal with contracts that cannot be transferred without the counterparty agreeing. It also has to address the employees, who transfer by operation of law whatever the agreement says. We cover the mechanics in asset purchase agreements explained.

In both cases, the agreement will be executed as a deed. That is not a formality: it affects how long a claim can be brought against you, which we come to below.

Warranties, indemnities and the disclosure letter

This is where sellers take on real personal exposure, and it is the part of the transaction that most repays attention.

A warranty is a statement of fact about the business, given by you personally, which the buyer relies on. If it turns out to be untrue, the buyer has a claim for damages measured by the reduction in the value of what it bought. A typical SME share purchase agreement contains between 100 and 300 warranties covering accounts, contracts, employees, property, intellectual property, data protection, litigation, compliance and tax.

An indemnity is different and considerably more dangerous. It is a promise to reimburse the buyer pound for pound for a specified liability if it arises, with no need to prove loss of value and generally no duty to mitigate. Indemnities are usually asked for in relation to a known or suspected problem, such as an ongoing dispute or an identified tax risk. Agreeing to one is agreeing to carry that particular risk in full. Our guide to warranties and indemnities in a business sale explains how each is negotiated.

The disclosure letter is the seller’s principal defence. It is a separate document, delivered at the same time as the sale agreement, in which you set out the facts that qualify the warranties. Anything properly disclosed cannot found a warranty claim, because the buyer bought with knowledge of it. The practical consequence is that a thorough disclosure letter is worth more to a seller than almost any amount of negotiation over warranty wording. Disclosure should be specific and cross-referenced to the warranty it qualifies, not a vague general sweep. We deal with how to do this properly in disclosure letters and how sellers limit their liability.

Alongside disclosure, the agreement will contain negotiated limitations on your liability. These are the ones to focus on:

Those contractual time limits matter because the statutory backstop is long. A claim on a simple contract must be brought within six years of the cause of action accruing under section 5 of the Limitation Act 1980, and because sale agreements are executed as deeds, the period is twelve years under section 8. Without negotiated time limits in the agreement, a seller can face a warranty claim more than a decade after completion. This is the single most overlooked point in general guidance on selling a business, and it is the reason the limitations schedule deserves as much attention as the price.

Where a buyer will not accept a low cap, warranty and indemnity insurance is sometimes used to bridge the gap, with the policy rather than the seller meeting claims. It is more common on larger deals, but it is increasingly available at SME transaction values and is worth asking about before conceding a cap you are not comfortable with.

How the price is actually paid

The headline price in the heads of terms is rarely the amount that reaches your account on completion day. Two separate mechanisms sit between them: the adjustment mechanism, which decides the final figure, and the payment structure, which decides when you get it.

Completion accounts or locked box

Under a completion accounts mechanism, a set of accounts is prepared after completion and the price is adjusted up or down against agreed targets for cash, debt and working capital. Under a locked box, the price is fixed by reference to a historic balance sheet date, with the seller undertaking that no value has leaked out since. Locked box gives a seller certainty and an earlier clean break; completion accounts give the buyer protection against a deterioration in the business between agreement and completion. The choice should be made in the heads of terms, not later. We compare them in completion accounts versus locked box.

Deferred consideration

Part of the price may be payable in instalments after completion. The critical question is what secures it. Once you have transferred your shares you are an unsecured creditor of the buyer, and if the buyer fails you rank behind everyone else. Security can take the form of a parent company guarantee, a charge, a retention held by solicitors, or a right to retake the shares. We cover the options in deferred consideration in a business sale.

Earn-outs

An earn-out makes part of the price depend on the business performing to agreed targets after completion, usually over one to three years. It is common where buyer and seller disagree on value, and it is also the single largest source of post-completion disputes we see. The reason is structural: you are being paid on the performance of a business you no longer control, run by someone whose decisions on overheads, group charges, investment and accounting policy can all reduce the figure your payment is measured against.

If you are accepting an earn-out, the protections to negotiate are the precise definition of the measure, a set of conduct undertakings restricting what the buyer can do to the business during the earn-out period, access to the records needed to check the calculation, and an independent expert determination clause for disputes. Our guide to earn-outs and how to protect yourself goes through each of these. It is also worth taking tax advice on an earn-out specifically, because the treatment of a right to future consideration is not straightforward.

Employees: TUPE and your obligations as seller

In a share sale, nothing happens to the employees as a matter of law. The employer is the company, the company has not changed, and contracts of employment continue unaffected. TUPE does not apply.

In an asset sale, the Transfer of Undertakings (Protection of Employment) Regulations 2006 almost always do apply. Employees assigned to the business being sold transfer automatically to the buyer on their existing terms, with continuity of service preserved, and dismissals for a reason connected with the transfer are automatically unfair unless they fall within the economic, technical or organisational exception. You cannot contract out of this.

Two specific duties catch sellers out:

• Employee liability information. Under regulation 11, the seller must notify the buyer of prescribed information about each transferring employee, including identity and age, the particulars required by section 1 of the Employment Rights Act 1996, disciplinary and grievance action in the previous two years, and actual or anticipated tribunal claims. This must be given not less than 28 days before the transfer, and the information must be correct as at a date no more than fourteen days before it is given. Missing this deadline is a straightforward breach with a financial penalty attached.
• Inform and consult. Both seller and buyer must inform and, where measures are envisaged, consult appropriate representatives of affected employees. There is no fixed minimum period, but it must be long enough for genuine consultation. Under regulation 13A, a business may consult its affected employees directly, without electing representatives, where it employs fewer than 50 employees or where fewer than 10 employees are transferring. That is a material simplification for small businesses and many owners are unaware it exists.

Even in a share sale, employment issues need looking at. Senior employees’ restrictive covenants, bonus and commission arrangements, any share options that vest on a change of control, and the position on directors who are also shareholders all have to be dealt with before completion. Our employment solicitors work alongside the corporate team on these points, and we set out the detail in TUPE when buying or selling a business.

Premises, leases and third-party consents

If you trade from leasehold premises, the property is often the item that sets the completion date, not the sale agreement.

In an asset sale, the lease has to be assigned to the buyer, and almost every commercial lease requires the landlord’s consent. Where the lease contains a covenant against assigning without consent, section 19(1) of the Landlord and Tenant Act 1927 implies a proviso that consent is not to be unreasonably withheld, whatever the lease says to the contrary. That protects you from an arbitrary refusal, but it does not make the process quick: the landlord is entitled to information about the buyer’s covenant strength, will usually require an authorised guarantee agreement, and will expect its costs to be paid. Allow six to eight weeks, and start earlier if the landlord is an institution.

In a share sale the lease stays where it is, in the company’s name, so no assignment is needed. But many commercial leases contain a change of control provision triggering a landlord consent requirement or a right to forfeit when the tenant company’s ownership changes, and those need to be checked at the preparation stage rather than discovered in due diligence. The same applies to change of control clauses in customer contracts, supply agreements, franchise agreements, licences and finance documents. Our commercial property solicitors handle the property workstream, and our post on commercial lease red flags covers the clauses that cause trouble.

If you own the premises personally rather than through the company, which is common in owner-managed businesses, decide early whether they are being sold with the business, retained and leased to the buyer, or retained and sold separately. Each has different tax and legal consequences and each affects the price.

Regulated businesses and professional practices

If your business needs a licence, a registration or a regulator’s approval to operate, that is usually the longest lead item in the transaction and it should drive the timetable.

The structural point is the one covered above. Registration attaches to the person carrying on the activity. Under section 10 of the Health and Social Care Act 2008, carrying on a regulated activity without being registered is a criminal offence. In an asset sale of a care home, dental practice or other CQC-regulated service, the buyer is a different legal person and therefore needs its own registration in place before it can lawfully operate. That application process runs to months, not weeks. In a share sale the registered provider is the same company throughout, so registration continues, although notification obligations still apply and the regulator will want to know about changes to directors and nominated individuals.

That difference is frequently the deciding factor in how a practice sale is structured, and it is a point almost no general guidance on selling a business makes. We act on these transactions regularly, including for care homes, pharmacies and GP practices, and our guides on selling a dental practice and the CQC application process show how the regulatory timetable works in practice.

Separately, the National Security and Investment Act 2021 requires mandatory notification to government, and clearance before completion, for qualifying acquisitions of entities active in 17 sensitive areas of the economy. These include advanced materials, advanced robotics, artificial intelligence, communications, computing hardware, critical suppliers to government, cryptographic authentication, data infrastructure, defence, energy, military and dual-use, quantum technologies, satellite and space technologies, suppliers to the emergency services, synthetic biology, transport and civil nuclear. Completing a notifiable acquisition without clearance renders it void. The sectors are drawn more widely than owners expect, and a technology or engineering business should check its position early rather than assume the regime is only for defence contractors.

Tax on a business sale: what sellers need to check

Tax is not a legal afterthought in a sale, it is one of the two things that determines what structure makes sense. The figures below are the position as at 6 October 2026, checked against HMRC and legislation, but tax treatment depends entirely on your personal circumstances and you should confirm your own position with your accountant or tax adviser before committing to a structure.

On a share sale, the shareholders make a capital gain. Capital Gains Tax for individuals is charged at 18 per cent and 24 per cent depending on income, with an annual exempt amount of £3,000 for the 2026 to 2027 tax year.

Business Asset Disposal Relief reduces the rate on qualifying gains. The rate has moved twice in recent years and getting it wrong is easy:

The relief is subject to a lifetime limit of £1 million of qualifying gains per individual, set out in section 169N of the Taxation of Chargeable Gains Act 1992. Gains above that limit are charged at the ordinary rates.

For a share sale, the conditions must be met for at least two years ending with the disposal. You must have been an employee or office holder of the company or a group company, the company must be a trading company or the holding company of a trading group, and the company must be your personal company, meaning you hold at least 5 per cent of the ordinary share capital and 5 per cent of the voting rights, and are entitled to at least 5 per cent of distributable profits and assets on a winding up, or alternatively at least 5 per cent of the proceeds on a sale of the whole company. Where the company has stopped trading, relief can still be available if the shares are sold within three years.

The two-year qualifying period is the trap. Share reorganisations, incorporations, new share classes, option exercises and bringing a family member onto the register can all reset or break it, which is why structuring work should happen well before a sale rather than in the month before completion. Our guide to Business Asset Disposal Relief for sellers covers the qualifying conditions and the common ways they are lost.

On stamp duty, the buyer rather than the seller pays, but it affects completion mechanics. Stamp duty on a transfer of shares using a stock transfer form is charged at 0.5 per cent, and is not payable where the consideration is £1,000 or less. The form must be sent to HMRC and the duty paid within 30 days of the form being signed and dated. The company’s register of members is not updated until the form is stamped, so this is a post-completion step that needs following through.

Selling to an employee ownership trust

An employee ownership trust is an alternative to a trade sale in which a trust acquires a controlling interest in the company for the benefit of all employees, with the purchase price typically paid out of the company’s future profits over a number of years. For owners who care about continuity and who do not want to hand the business to a competitor, it is a genuine option, and it avoids the disclosure and warranty exposure of a trade sale almost entirely.

The tax position changed significantly and recently, and a great deal of material online is now out of date. Section 236H of the Taxation of Chargeable Gains Act 1992 previously allowed a qualifying disposal to an employee ownership trust to be made on a no gain, no loss basis, which in practice meant no Capital Gains Tax at all. Section 35 of the Finance Act 2026 restricted that relief: where a gain accrues, only 50 per cent of the gain is now a chargeable gain, and the disposal is not treated as a qualifying business disposal for Business Asset Disposal Relief. That restriction has effect in relation to disposals made on or after 26 November 2025.

Alongside that, Finance Act 2025 tightened the qualifying conditions, adding a requirement that the trustees are resident in the United Kingdom at the time of disposal, a trustee independence requirement, and a requirement that the trustees take all reasonable steps to ensure the consideration does not exceed market value and that interest on any deferred consideration does not exceed a reasonable commercial rate.

None of that makes an employee ownership trust a bad route, and for many owner-managed businesses it remains attractive. It does mean the arithmetic has to be done afresh against current law rather than against guidance written before these changes. We go through the structure, the conditions and the process in selling to an employee ownership trust. Owners weighing an internal sale should also consider a management buy-out, which our management buy-ins and buy-outs team handles, and which has a different risk and funding profile again.

Signing, completion and the completion meeting

On most SME sales, signing and completion happen on the same day, which is known as a simultaneous completion. Where conditions have to be satisfied first, such as landlord consent, regulatory clearance or a national security notification, the parties sign on one date and complete on a later one, and the agreement will contain undertakings about how the business is run in between.

On a share sale, completion typically involves:

• Executing the share purchase agreement, the disclosure letter and the tax covenant.
• Board resolutions approving the transfers and the changes to the board, and shareholder resolutions where the articles require them.
• Delivery of signed stock transfer forms and share certificates, with indemnities for any certificates that have been lost.
• Resignation letters from outgoing directors and the company secretary, each confirming no outstanding claims against the company.
• Delivery of the statutory books, the company’s records and the company seal if there is one.
• Repayment or release of director loan accounts, and release of any personal guarantees you have given to banks, landlords or suppliers. This one is routinely forgotten and it leaves a former owner on the hook for a business they no longer own.
• Transfer of the funds, and any retention being paid into a joint account or to solicitors to hold.

Afterwards, the register of members and the PSC register are updated, Companies House filings are made for the director changes and the change of control, the stock transfer forms are stamped, and the buyer’s details replace yours on bank mandates, insurance and licences. The personal guarantee release point deserves repeating: check the list of every guarantee, indemnity and personal security you have ever given, and make release a completion deliverable rather than a post-completion aspiration.

After completion: restrictive covenants and what you still owe

Your obligations do not end when the money arrives, and the restrictive covenants in the sale agreement are the ones most likely to affect what you do next.

A buyer paying for goodwill will require you not to compete with the business, not to solicit or deal with its customers, and not to poach its staff, for a defined period within a defined area. Covenants of this kind are restraints of trade and are void unless they go no further than is reasonably necessary to protect a legitimate interest. The important point for sellers is that covenants given on a business sale are judged far more generously by the courts than the equivalent covenants in an employment contract, because the buyer has paid for the goodwill it is protecting and the parties are taken to have bargained at arm’s length with advice. A two to three year non-compete that would be struck down in an employment contract may well be upheld in a share purchase agreement.

So negotiate them before signing rather than assuming they will fall away afterwards. In particular, look at the definition of the restricted business and the restricted territory, which are often drafted far more widely than the business you actually ran, and make sure there is a carve-out for anything you genuinely intend to do next. If you are staying on under a consultancy or service agreement, check how the covenant periods interact with it, because a covenant running from the end of your consultancy rather than from completion can extend your restriction by years.

Your other continuing obligations will usually include the warranty and tax covenant claim periods, cooperation with the preparation of completion accounts, any earn-out conduct and information provisions, confidentiality, and assistance with transitional matters. Keep your copy of the signed documents, the disclosure letter and the complete data room contents somewhere you can find them, because if a claim is made against you in two years’ time, the data room index is what will answer it.

What this means for you

If you are thinking about selling, three things make the biggest practical difference. Start the legal preparation before you start marketing, because problems you find yourself are cheap and problems the buyer finds are expensive. Settle the structure and the key risk allocation in the heads of terms, while you still have competitive tension, rather than in month four when you do not. And treat the limitations schedule and the disclosure letter as the most important documents in the deal, because they determine what you keep.

The tax position in particular has moved twice in the last two years, and it is worth checking current rates and your own eligibility rather than relying on figures quoted in older guidance. That is an accountant’s call as much as a solicitor’s, and the two pieces of advice need to be taken together.

We act for sellers and buyers across owner-managed businesses, SMEs and professional practices, covering the corporate, employment, property and regulatory sides of a sale under one roof. If you are preparing to sell, or you have had an approach and want to know what you are agreeing to, speak to our selling a business team or read more about our wider mergers and acquisitions work. Call us on +44 207 566 1188 or email info@gurvelegal.com and we will talk it through with you.