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Selling your company through a share sale involves planning, valuation, legal documentation and tax structuring. This article outlines each step – from appointing advisers and negotiating heads of terms to due diligence, SPA drafting and post-sale obligations – helping business owners prepare for a smoother, more confident sale process.

Ready to sell? Here’s the expert insight to guide you through every move.

<p>Selling your business can be a rewarding but daunting process, and it’s important that business owners are prepared for what the process entails. Such a decision often follows years, if not decades, of hard work – and for many, the path to sale is as much about the journey as the destination.</p>
<p>This article focuses on the process of selling a company through a share sale in the UK – where ownership is transferred by selling shares in the business, rather than its individual assets. It outlines what to expect, including the process, documentation, timelines and tax considerations.</p>
<h2>Instruct your solicitor and accountant</h2>
<p>The first and most important step when selling your business is always to seek professional advice. The earlier you engage a solicitor and accountant, the sooner you can begin putting the wheels in motion for a smooth and successful sale.</p>
<h2>Valuation and preparing for sale</h2>
<p>As well as instructing professionals, and sometimes before seeking professional advice, you should start determining the value of your business. This typically involves evaluating the business’s financial and non-financial assets, and methods include earnings multiples, discounted cash flow analysis and asset-based valuations. The chosen method will depend on your industry, revenue model, profitability and growth potential.</p>
<p>With a value in mind, you can begin finding a buyer. This can be done by a broker if you don’t already have a buyer in mind.</p>
<h3>Intellectual property</h3>
<p>The valuation process will also need to consider any intellectual property (IP) that your business may own, including trademarks and patents. For many businesses, IP may be the most attractive selling point.</p>
<h2>Heads of terms</h2>
<p>Once a buyer is identified, the next step is to agree ‘heads of terms’. This is a largely non-binding summary of the key deal points – such as price, structure and timing – and is usually signed before significant legal drafting begins. The heads of terms generally represent the intentions of the parties, although certain clauses like exclusivity and confidentiality will be legally binding so that you are protected throughout the negotiation process.</p>
<h2>Due diligence</h2>
<p>Before any deal progresses, buyers will want to carry out due diligence. This is an in-depth review of your business, covering financials, legal documents, contracts, IP, staff and compliance.</p>
<p>It’s important that, before reaching this stage, accounts are up to date, contracts are in place and any risks are flagged early on to avoid problems arising.</p>
<h2>Understanding share purchase agreements and warranties</h2>
<p>The share purchase agreement (SPA) is the formal, legally binding contract that governs the sale. It sets out the terms of the deal, including:</p>
<ul>
<li>The price and payment terms</li>
<li>The date of completion</li>
<li>Any conditions that must be satisfied before the deal completes</li>
<li>Warranties (i.e. legally binding statements about the company)</li>
<li>Indemnities, if specific risks are being covered</li>
<li>Restrictive covenants preventing the seller from competing post-sale</li>
</ul>
<h3>What is a restrictive covenant?</h3>
<p>A restrictive covenant is a contract or agreement between parties that restricts one of these parties from carrying out certain endeavours. As we discussed in our <a href="https://www.linnearlegal.co.uk/resources/corporate-law-2024-roundup-key-cases-developments/">roundup of corporate law cases in 2024</a>, these covenants cannot be overly broad in terms of length, scope and geographical range. However, if enforceable, they can have a large impact on what a seller can do post-sale.</p>
<h3>What are warranties and indemnities?</h3>
<p>Warranties and indemnities are legal provisions that form an important part of the final sale agreement, and can protect the buyer of the business from financial loss by ensuring that the seller is liable if any statement about the company is incorrect.</p>
<p>Warranties can be wide-ranging and are often heavily negotiated. They may cover accounts accuracy, ownership of shares, employee matters and litigation. If any of these turn out to be false, the buyer may have grounds for a claim. It’s vital to review these with your solicitor and disclose anything that could be material.</p>
<h2>Timeline: how a share sale typically unfolds</h2>
<p>The sale of a business doesn’t happen overnight. Here’s a rough guide to the process.</p>


<p>This is a general example of the timeline of a business sale. Every sale is different, but they all broadly follow a variation of this structure.</p>
<h2>Tax and deal structure considerations</h2>
<p>Tax is a major factor in any sale. Most sellers will pay capital gains tax (CGT) on the proceeds, though business asset disposal relief may reduce the rate to 10%, subject to meeting certain criteria.</p>
<p>Buyers typically pay stamp duty on the share purchase (at 0.5%), but deal structure can impact how and when tax is paid.</p>
<p>Deferred payments, earn-outs or retention accounts may be used to bridge valuation gaps or manage risk.</p>
<p>It is strongly recommended that you speak to both legal and tax advisers early in the process to optimise your position.</p>
<h2>Common pitfalls and how to avoid them</h2>
<p>The process of selling a business can open the door to myriad issues, one of the most common issues being that business owners often have a deep emotional attachment to the business they founded and can find the process of letting go – understandably – very difficult.</p>
<p>Here are some common mistakes:</p>
<ul>
<li><strong>Poor preparation</strong>: disorganised or incomplete documentation can cause delays</li>
<li><strong>Overvaluation</strong>: unrealistic expectations may put off serious buyers</li>
<li><strong>Weak disclosures</strong>: failure to flag risks can lead to warranty claims later</li>
<li><strong>Misunderstood obligations</strong>: sellers should be clear on any post-sale restrictions, such as non-compete clauses or ongoing consultancy roles</li>
</ul>
<p>Addressing these early can save time, stress and money.</p>
<h2>Post-sale: what to consider after the deal</h2>
<p>Although your main focus may be completing the deal, it’s worth thinking ahead:</p>
<ul>
<li>Are there any post-sale obligations or handover responsibilities?</li>
<li>Have you received all payments due (or will you need to track future ones)?</li>
<li>What are your tax reporting obligations?</li>
<li>What’s next? Retirement, a new business or a break?</li>
</ul>
<p>A smooth post-sale experience starts with planning ahead.</p>
<h2>From start to finish</h2>
<p>Selling your company through a share sale can be a rewarding process, but it’s not without complexity. With clear planning, proper documentation and expert advice, it can also be a smooth one.</p>
<p>At Linnear Legal, we help business owners navigate the sale process from start to finish. Whether you&#8217;re preparing your business for market or reviewing the first draft of an SPA, our corporate law experts can support every step.</p>
<p>If you&#8217;re thinking about selling your company, <a href="https://linnearcms.wpenginepowered.com/get-in-touch/" rel="noopener">speak to a solicitor</a> at Linnear Legal for tailored legal advice.</p>


Business owners can better prepare for a successful share sale with guidance on planning, legal steps, negotiation and what to expect after the deal closes.

What to expect when selling your company

Learn what to expect when selling your company, including valuation, due diligence, and tax implications and planning.

What to expect when selling your company | Linnear Legal

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What to expect when selling your company

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