People sell their limited companies for all sorts of reasons. They might be looking to retire, hit hard times, or want to generate a profit. Sometimes they simply don’t wish to run the company anymore, and are looking for an out.
Like most aspects of registering and running a business, selling your UK limited company usually means no shortage of paperwork, so before ploughing ahead it’s well worth taking a step back and thinking about how you plan to get the business ready for sale. A bit like selling a house, you want the best possible price, with the least amount of fuss.
You can normally sell your shares to pretty much any eligible buyer, from friends and family, to someone else entirely. You can even transfer them, rather than selling.
Keep in mind that if you’re selling a car or games console, you’ll probably just hand it over to whoever comes along with the right amount of money, but selling your company isn’t so straightforward.
You’ll need to credit check your buyer to make sure they can afford it.
As part of your due diligence commitments, you must be sure that you know where your buyer’s funds are coming from, and how the transfer of funds will work.
For instance, whether they will send the money to a solicitor, who then sends it on to you (a bit like when you buy a house). Make sure you agree it in advance – in writing! It’s also a good idea to decide how the legal documentation will be prepared to finalise the deal and complete the transaction.
Complete a Stock Transfer Form
You will need to complete a Stock Transfer Form with the details of the share transfer. This confirms who is buying, who is selling, and the amounts/values involved. Depending on how much money is changing hands for the shares, you might also need to pay stamp duty to HMRC.
Can I just sell part of my limited company if I want to?
Yes, you can, and this is quite common in companies which want to sell shares in order to raise funds. Just be aware that selling part of your company can mean you have less control, depending on the type of shares that you sell, or the agreement that you have with the buyer. It’s best practice to draw up a formal shareholders’ agreement, to help avoid future complications or disputes.
Could I make my company dormant instead?
If you don’t want to operate your company right now, you can make it dormant instead. This means it will still exist legally, but won’t be trading. Tax-wise, you’ll need to tell HMRC your company is dormant and confirm it’s not taking in any income from trade. Even once dormant, you’ll still need to submit annual accounts and a confirmation statement to Companies House. It’s a bit different from a company which is simply not trading.
Do I need permission to sell my company?
This partly depends on whether you’re the only shareholder, or if there are other shareholders who also own part of the company.
If you have any business partners or there are other shareholders
If there are other shareholders then the company isn’t entirely yours to sell, and ownership is shared between you depending on how many shares you each own, and what type they are.
You can still sell your own shares if you want to but again, just make sure that there’s nothing in the shareholder’s agreement or the company’s articles of association which restrict this.
In some companies the other shareholders have pre-emption rights which they need to waive for the sale to go ahead. Pre-emption rights protect shareholders by giving them the power to prevent a sale to a buyer they don’t want to be in business with.
If you’re the only director and shareholder
You can simply sell your company without consulting anyone else – you’re the only one who needs to approve the transfer of shares to the new owner. But as we’re accountants – we strongly recommend you take advice! It’s also worth checking the terms of any funding or loan agreements you currently have in place in case they prevent a sale.
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How long does it take to sell a limited company in the UK?
How long is a piece of string? Company and sector appeal, location, revenue, cash flow, time, and even sheer good luck all play their part. It’s about how comprehensively you prepare your company for sale, too.
You might be able to speed up the process by being as transparent as possible, right from the start, but just be wary of giving away sensitive information – especially before getting any non-disclosure agreements in place.
Can I stay on as a director or shareholder?
This largely depends on the agreement you make with the new owner. Continuing to be a director after selling a company (or even keeping some shares) is fairly common practice. It’s often for a set period of time after the sale in order to make the handover smoother. It also reduces risk for the new owner by giving staff, suppliers, and clients a sense of security and continuity.
What about selling company assets?
You might decide to sell the company’s assets separately to the sale of the shares, or simply bundle them all up together. It’s largely up to you (and the other shareholders if there are any), but make sure you agree this with the buyer in advance.
Assets might include equipment, fixtures, furniture, accounts receivable, investments, inventory, and goodwill. You might also be able to claim Business Asset Disposal Relief, to reduce the amount of tax you might have to pay as a result of selling assets.
If you’re considering a sale for financial reasons then you might sell the company’s assets as a going concern. This is where enough of the assets are sold for the company to continue in its current form. It then keeps its staff, suppliers and customers.
Make sure you appraise each of your assets individually – including goodwill (which is the value of your brand and how people perceive it) – so you know their value. This then shows you what your business is worth in total.
Transferring liabilities in a company sale
Most companies have liabilities, such as credit cards, tax, loans, or even staff wages to be paid. They’ll generally be transferred to the new owner when the company’s sold, but the buyer will obviously be very keen to understand the extent of the liabilities before they commit to anything, so prepare for lots of questions!
Who do I need to tell if I sell my limited company?
You’ll need to tell everyone who has a connection to the company, from customers with outstanding work, to suppliers, staff, and beyond. You must also make sure that you carry out your statutory reporting obligations, and let Companies House and HMRC know!
Telling Companies House about the sale of your company
When you sell your company or make any other significant changes to it, it’s essential that you tell Companies House and update the register. Companies are legally required to have at least one director at all times, so if you’re the sole director and you’re not staying on after the sale, you must appoint a new director before you resign. Once the new appointment is made, you’ll need to submit an AP01 form to Companies House to let them know.
Complete a TM01 Form to report your resignation as director, and file a confirmation statement updating the shareholder details and shareholdings at Companies House.
Don’t forget to update the company’s statutory registers of members, directors and details of ‘people with significant control’.
And what about HMRC?
You’ll need to complete a Company Tax Return to cover the accounting period up until the sale date. You might also need to pay Corporation Tax on any profits made during that time, or accrued from the sale of business assets.
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About The Author
I'm an AAT and ACA qualified Chartered Accountant with over 13 years experience working with businesses, contractors and sole traders. I also love watching live music, and quizzes!
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