Buyers usually want an asset sale, because they can leave problems behind. Sellers usually want a share sale, because it is a clean exit. What actually decides it is frequently the tax analysis — which is why the structure should be settled with an accountant before heads of terms rather than recorded in them and checked afterwards.
What Each Structure Actually Does
On a share sale the buyer acquires the company itself. The company continues unchanged as a legal person, so it keeps its contracts, licences, trading history, employees and liabilities — including the ones nobody has found yet. All that changes is who owns the shares. That is why due diligence on a share purchase is more searching and why warranties and indemnities carry more weight: the buyer is inheriting a history. On an asset sale the buyer takes selected assets from the company — the trade, equipment, stock, goodwill, intellectual property, customer book. The company itself does not move and generally keeps its liabilities, which is the buyer’s attraction. But nothing transfers automatically except employees, so every contract, lease, licence and consent must be dealt with individually. That single point is worth emphasising: on an asset sale amounting to a transfer of an undertaking, employees and the obligations attaching to them transfer by operation of law, and no agreement between buyer and seller alters that. On a share sale the employer never changes, so those provisions are not engaged at all.
Consents, Tax, and Why It Cannot Be Fixed Later
An asset sale needs far more consents, and those consents drive the timetable rather than follow it: material contracts may each need the counterparty’s agreement to assignment or novation, a leased premises will generally need landlord consent, and licences and permits may not be transferable at all. A share sale avoids most of that because the contracting party never changes — but it does not avoid change-of-control clauses, which sit in banking facilities, equipment leasing, franchise agreements, software licences and increasingly in customer contracts, and which can hand a counterparty a right to terminate precisely because the shares moved. On tax: the treatment of a share disposal and an asset disposal differ, and the seller’s personal position and the company’s position are different questions again. This firm does not advise on tax and states no rate, threshold, relief or condition anywhere on this site — that is for your accountant and Revenue. What can be said is procedural, and it is the most useful sentence on this page: get the tax advice before heads of terms. Structure recorded in heads of terms is not legally binding, but by the time anyone wants to change it the price has been agreed on assumptions that depend on it, due diligence has begun on that basis, and the party asking to change it is asking the other side to accept a different economic outcome. In practice, it does not get changed.
Structure Not Settled Yet? That Is the Good News.
Before heads of terms is the only comfortable time to have this conversation. Send what is being sold, whether an accountant has been asked, and whether there are employees and a lease.
Call 01 5827148