Corporate and Commercial Lawyers in UK: Romford, Upminster, Brentwood

Our top tips when starting out are to make sure you understand your role as a Director. When you incorporate a company you will be sent information from Companies House reminding you of your role and responsibilities. One thing you need to remember is that ignorance of the law is no defence, so make sure you understand what it means to be a Director before you take on the role.  Also, we would advise, make sure you have a good accountant and a good lawyer. It's certainly worth the expense and you benefit from it in the long run.

The main difference between a share sale and a business and asset sale is who is selling. In a share sale, the sellers are the individual owners of the shares – the shareholders. They sell their interest in the company and receive the purchase price. The company continues to run as it always has. In a business and asset sale, the seller is in fact the company, and it is selling its business and assets.  On a business and asset sale the purchase price actually belong to the company.

Heads of terms are the agreed principle terms between a buyer and a seller. Their purpose is to ensure the parties can agree the main principal terms before they incur costs of undertaking due diligence or instructing lawyers. Heads of terms are useful as they set out the purchase price and any conditions attached to the purchase price, for example, if there are targets to be met for deferred consideration or for earn out clauses. You could also include provisions for whether the seller is going to stay on in the business or whether they're going to be a consultant. Heads of terms are not intended to be legally binding. They are intended to be guiding principles so that you can look back at them throughout the transaction process as a reminder as to what was agreed at the outset.

Whether your transaction is a share sale or business and asset sale, there will be a sale and purchase agreement. The sale and purchase agreement is the binding contract between you and your buyer or seller. This will set out the purchase price, the specific agreed terms and additional terms such as restricted covenants, and it will also set out in quite a lot of detail the warranties you're expected to give. Warranties are promises you make about the business, which your buyer relies on when entering into the purchase.

Due diligence is a crucial stage in the transaction, and it's the buyer's chance to effectively audit your company and make sure they know what they're getting. From a legal perspective, it's a good opportunity for your advisors to find out if there are any risks or any issues with the company that they can protect you from in the final sale agreement. From a seller's perspective, it can be quite extensive. You'll receive a long legal due diligence questionnaire, which asks a number of tailored questions to find out as much information about the company as possible. It will assist later on in the transaction when it comes to the disclosure part of the deal, which is your main protection against warranty claims post-completion.

The difference between a shareholder and a director is that a shareholder owns the company. Sometimes there will be one shareholder, sometimes there are multiple shareholders. The shareholders are responsible for making the major decisions within a company, such as appointing directors, changing the company’s structure and amending the articles of association. The directors do not own the Company but are responsible for making the day-to-day decisions about the running of the company, such as the commercial agreements that the company enters into.  Directors are accountable to the shareholders. They have statutory duties set out by the Companies Act, and they also have duties to the shareholders, and their actions are governed by the articles of association which are written and prepared by the shareholders.

What happens to your business when you die, will very much depend on the provisions which may be set out in the company’s articles of association or in a shareholders agreement, if you have one.  Articles and shareholders agreements can set out rights of pre-emption that give the other shareholders rights to buy your shares on your death. You may also have in place other succession planning, where you have appointed someone in your company with the intention that they take over when you die, or when you leave. If you don't have any pre-emption or succession planning in place and you have model articles and no shareholder agreement, then your shares in the company will pass on your death in accordance with your Will, or if you do not have a Will, in accordance with the intestacy rules.

Deciding which structure is best between a partnership and a company will be dependent on a range of different issues.  Income belongs to the partners in a partnership and so they are entitled to take their remuneration straight out of the partnership profit.  Whereas income in a company belongs to the company and the shareholders take their remuneration by way of dividends.  A company has to be registered at Companies House (as well as HMRC) and will have to publish annual accounts and make regular filings, whereas a partnership only has to register itself with HMRC.  A company has limited liability. This means that if the company is sued or owes any debts, the only thing that can be recovered is the company assets and not a shareholder’s personal assets. With a partnership, your personal assets are on the line as you are personally liable. In addition, there are also tax benefits to both. It is best to take advice from an accountant on what is the most tax efficient way of running your business.

What you need to know about your buyer firstly is, how are they financing the purchase. They could be financing it through cash that they hold on account, or they could be taking a loan, or they could be backed by an investor. Each different method of funding is going to have an impact on how the transaction runs. Secondly, it's good to know whether they are being advised by solicitors and accountants because this will make the whole process a lot more streamlined. Thirdly, it's good to know why your buyer is purchasing your company. How does your company fit into their business plan and what are the prospects for the company's future? And finally, it's good to know whether or not they want you to stay on and be involved in the business after the purchase is completed.  They may want you to stay on for a short period of time to help facilitate the implementation of a new management team or you may be fundamental part of their team for a longer period of time.