How to sell a limited company

Selling a limited company can be a complex process, and of course, it’s a significant decision, with both financial and emotional implications that should be considered.

People decide to sell their limited company for a whole host of different reasons. However, the vast majority of business owners will choose to sell their limited company for the following reasons:

Retirement: This is one of the most common reasons why a director decides to sell a limited company, particularly older business owners who are ready to enjoy their retirement years.

Financial Gain: Selling a limited company can also provide a significant financial return for the owner. Many directors then go onto to invest in other ventures or simply enjoy a comfortable lifestyle.

A New Challenge: Some directors reach a stage in their business journey where they are simply ready to embrace new opportunities and take on a new challenge. To be able to do this, many business owners sell their limited company.

Consolidation purposes: It’s often the case that a larger company will acquire a smaller company in order to expand their market share, or gain access to new technologies and products.

Lack of Succession Planning: If there is no suitable successor within the family or among employees, some directors are left with no other option but to sell up.

Changing Market Conditions: Changing market conditions including increased competition, technological advancements or general shifts in the business landscape  can also prompt a director to sell their limited company.

Health Issues: Health problems can also leave business owners with no other option but to sell their company, especially if they find themselves in a position where they are no longer able to manage its day-to-day operations.

You can either sell your shares to a third party buyer, or if you have any existing business partner, you can also consider selling to them too! And remember, when

transferring ownership, you will need to refer to the articles of association and any shareholders’ agreement. These documents often contain provisions for buying and selling the shares in your company.

Of course, if you’re thinking about selling your limited company, it’s important that you understand the processes involved in. After all, your ultimate goal is to get the best possible price for your business, with the least amount of hassle, right?

First and foremost, you should be aware that, according to Gov.uk, when selling a limited company, your responsibilities will be different, depending on whether:

• You’re selling the entire shareholding in your limited company
• The company is selling part of its business

What happens if you are selling the entire shareholding?

If you’re selling the entire shareholding, you should first of all take any other shareholders or directors into consideration and then you will need to appoint new directors or company secretaries. You should appoint new directors before you resign as a director yourself

You must also make sure that you inform Companies House about these changes to avoid any penalties or complications along the way.

What happens if you’re the only director and shareholder?

If you are the only director or shareholder, you can sell your company without consulting anyone else – you are the only person that will need to approve the transfer of the shares to the new owner.

Of course, you should always seek professional advice from a qualified accountant who is trained to help you oversee this process, which can sometimes be complex.

 Completing a Stock Transfer Form

Finally, you will need to complete a Stock Transfer Form which outlines all of the details of the share transfer.

This form features the following information:

• Who is buying the business?
• Who is selling the business?
• The amounts/values involved.

A stock transfer form is a legal document used to transfer ownership of shares in a company from one person (the transferor) to another (the transferee).

It’s a vital step in changing the registered ownership of shares and includes the following information:

• Company Name: The full legal name of the company whose shares are being transferred.
• Transferor Information: Full name, address, and contact details of the person or entity transferring the shares.
• Transferee Information: Full name, address, and contact details of the person or entity receiving the shares.
• Number of Shares: The exact number of shares being transferred.
• Share Certificate Number: The unique identification number of the share certificate(s) representing the shares being transferred.
• Consideration: The amount of money paid for the shares.
• Signatures: Signatures of both the transferor and the transferee.
• Date: The date the form is signed.

It’s important that all of the above is provided accurately.

 

Steps to Complete a Stock Transfer Form:

Obtain the Form: Obtain a stock transfer form from the company’s registrar or transfer agent.

Fill in the Information Accurately:  It’s crucial that all information provided is accurate and complete. You should always make sure that you check over the document thoroughly for any errors, as any incorrect information provided can delay the transfer process.

Signatures: Both the transferor and the transferee must sign the form in the designated spaces.

Enclosures: You will also need to attach the original share certificate(s) to the completed form.

Submit the Form:  Finally, submit the completed form and share certificate(s) to the company’s registrar or transfer agent!

VAT registration

As part of the process, if your company is registered for VAT, you should also transfer the VAT registration number to the new owner.

Again, a qualified accountant will be able to support you when it comes to handling any VAT queries.

 Tell your employees

If any employees are affected by the sale (for example the company’s selling its production business and factory staff will be affected), you must tell them about the changes, including:

• When and why part of the company is being sold
• Details about the redundancy terms or relocation packages, if necessary
• Make sure you don’t breach employees’ rights when a business changes ownership.

Do you need a solicitor to sell a limited company?

No, if you’re planning on selling your Limited Company, you will not need to worry about enlisting the help of a solicitor. However, it is a smart business decision to liaise with a solicitor when it comes to ensuring that you are protected during the negotiation stage.

Who owns the assets of a limited company?

 It is the company shareholders who own the business, however not the assets held within it. With this in mind, if you are the only shareholder, you should be aware that you do not own your company’s assets as they are owned by the company.

It’s important to note that selling a company is a significant decision with both financial and emotional implications. ¹ It’s crucial to carefully consider all factors and seek professional advice before making a decision.

 Why choose React Accountancy?

Here at React Accountancy, we provide trusted accountancy services to start-up, established and multi-national businesses across a diverse range of industries.

From the moment you get in touch, our approachable, friendly and professional team will go above and beyond to ensure that you receive the right advice, support and accountancy solutions for your business.

All of our team has years of experience in providing accountancy services that support your business including complex financial issues.

Get in touch today for further information about any of our services.

You can reach us on 01914324110 or contact us via email using info@reactaccountancy.co.uk