Professional Documents
Culture Documents
CATHERI NE GANNON
HELEN CURTI S
What we are covering
Preparation for Sale
Sale of Shares or Sale of Assets
Heads of Agreement
Deferred Consideration
Indemnities and Warranties
Tax
Preparation for Sale
Make sure you have formal agreements in place
with your suppliers and customers
Employees and directors
Run your own due diligence
Power to sell articles and shareholders
agreements
Consents and assignments
We can send a checklist of issues to think about
Financial due diligence
Is the business solvent
What debts will need to be repaid by the
buyer
Dividends pre-sale
Cash in the bank and working capital
Completion accounts
Valuation
How much is the business worth
Obtaining details on past sales difficult
Price earnings multiples
Recurring fee income
What is really being sold
Dealing with brokers fees and commissions
Sale of Shares or Sale of Assets
Share Sale
Asset Sale
Heads of Agreement
Not legally binding
Exclusivity period
Important discussion areas you might not
consider:
- anti-embarrassment clause
- restrictive covenants
- timing of consideration
Terms of Sale
When will you be paid
How much will you be paid cash or shares or
both
Restrictive covenants
Ongoing responsibilities
Claw backs
Deferred Consideration
Earn outs
Delayed payments
Warranties
Principle of Caveat Emptor
Contractual statements
Indemnities
Cap
Disclosure Letter
Conditions Precedent
Buyers due diligence
Different for Asset Sale or Share Sale
Non-Assignment provisions in contracts
Intellectual Property
Due Diligence
Evaluation
Purchase agreement warranties
Transfer
How much will you be left with
Entrepreneurs Relief
Overview of the relief
Material disposals
Disposal of shares
Whole or part of business
Disposal of one or more assets
Share options
What is Entrepreneurs Relief
Applies to gains made on disposal of all or part
of a business
Includes assets following cessation
Applies to first 10m of gains
Charged at 10%
Lifetime limit of 10m
No minimum age limit
What does it mean in terms of tax
Business sold for 876,000
Less: cost of shares (1,000)
Capital gain 875,000
Less: annual exemption 10,900
Taxable gain 864,100
ER CGT @ 10% 86,410
Walk away with 789,590
Qualifying Business Disposals
Shares or securities in a trading company
The whole or part of a business
Certain assets used in a business which has
ceased
Certain personal assets used in a business.
Shares in a trading company
Conditions to be met for one year period
ending on date of disposal
Relief available if company has ceased
trading
Provided held at least 5% for one year on
date of disposal, acquisitions over the 5%
will qualify even if held for less than a year
Employee or officer no minimum hours
Whole or part of a business
Owned for one year period ending with date
of disposal
Disposal of all or part of the business as a
going concern
Any trade, profession or vocation
Assets not used for the business will not
qualify
Case law on what constitutes disposal of
part of a business
Assets used on cessation of business
Conditions to be met:
Owned by individual throughout 1 year
ending on date which business ceases
Business ceased to be carried on in the
period of 3 years ending on date of
disposal
Assets not used for the purposes of the
business excluded
Personal assets used in business
Disposal by partner or shareholder of
personally-owned asset
Conditions to be met
- disposal (which qualifies for ER)
- withdrawing from business
- throughout 1 year prior to disposal
- not used for unconnected purposes
Winding up the company and ER
Procedure for winding up
Capital payment or dividend payment
Conditions for ER
Taxation of earn outs
Pay tax upfront or later
Valuation with HMRC
Payment dates manage cash flow
ANY QUESTIONS
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