What you need to know about Mergers and Acquisitions in England and Wales
Lets start with the basics.
What is a limited company?
A quick recap on limited companies:
If you own your own company then you are personally responsible for everything and anything that may go wrong, including with regards to the companies finances.
Having a limited company means that the owner, or owners, have ‘limited liability’. A limited company exists in its own right and it means that the owners are not directly responsible for the company finances in the event of bankruptcy. So a limited company may become bankrupt but the owner(s) will not.
What is an Acquisition?
In most cases of private acquisition, the buyer is usually a limited company. If the limited company is a new entity without sufficient stock or funds, then the seller is entitled to ask the parent company to act as a guarantor.
Restrictions of share transfers
You might be asking yourself if there are any restrictions on share transfers?
Before the transfer of any shares is made, there are certain checks that need to be carried out, including whether current shareholders have any rights to make offers on the business prior to any sale being agreed upon. Protocol usually dictates that the shareholders of any limited company should be contacted in writing and any sale or merger should be explicitly outlined.
There may also be restrictions on foreign ownership of a UK company. Though this is only likely if there are national security issues involved. There may also be restrictions if the company taking over has interests in defense, financial services, or media outlets.
Should I do a Share purchase or asset purchase?
If you are buying a Limited Company it is a purchase of shares and your solicitor will need to draft the Share Purchase Agreement. If you are making an asset purchase then the seller’s solicitor will need to draft an Asset purchase agreement.
Share purchase advantages
If you make a share purchase the advantage is that all of the assets are acquired. This also means that all and any liabilities will also be transferred.
Asset purchase advantages
However if you make an asset purchase it is not quite as simple as some of the assets will remain the liability of the previous owner. The advantage of this however is that only certain identified assets may be bought and not all liabilities will be transferred into your ownership.
For all enquiries regarding merging a business, contact us for a free, no obligation quote