Difference between Selling Shares and Selling the Business

When you are considering selling your business, a key starting point will be to decide whether you want to sell:

• ownership of your company’s shares; or
• just the assets of the business.

What is a Share Sale?
A share sale is where the buyer purchases shares in a business’s legal entity, rather than just the assets. In a share sale the acquirer may purchase anywhere from a minority shareholding to a majority or controlling interest to 100% of an entity.

A share sale can be risky because the buyer is taking ownership of the company, which includes the company’s liabilities. A potential buyer will want to conduct thorough due diligence to ensure it understands what assets and liabilities it is taking on. A buyer will also want to enter into a share sale agreement which requires the sellers to provide warranties and representations in relation to the shares. This way, the buyer can protect themselves from any unexpected losses they suffer as a result of taking ownership of the shares.

What is an Asset Sale?
Assets can include plant, equipment, inventory, property, company name, intellectual property, and goodwill.
When you are selling a business, you are selling all, or most, of the assets which comprise the business. The buyer will want to ensure that it is acquiring all of the assets it needs to achieve its commercial objectives. The buyer will conduct due diligence to verify this and will want the details of the assets being transferred documented in a business sale agreement.

Selling your business means the business will be owned by a different legal entity, being the owner. A business sale will require the new owner to take over the business contracts and the employees of the business. You will no longer be performing obligations on behalf of the business or be the employer of the staff.

If you would like to know more about the difference between Selling Shares and Selling the Business or your rights and options, Straits Lawyers are here to help. We are now offering online services in both English and Chinese.

Please note that this article does not constitute legal advice and Straits Lawyers will not be legally responsible for any actions you take based on this article.