If you are selling shares in your company, there are several stages of the legal process where we will need your active involvement and input. This guide sets out what to expect and explains your role at each key stage of the transaction. While there is much that we will handle on your behalf, your cooperation and responsiveness are vital to keeping the deal on track and ensuring your interests are properly protected.
This guide focuses on the parts of the share sale process where we will ask for your direct help and attention. It is not a complete list of everything that takes place, but it highlights the most important steps where we will need your input to move the deal forward.
1. Legal Due Diligence: Answering the Buyer's Questions
Once our engagement is confirmed and our ID and anti-money laundering checks have been completed, the buyer’s solicitor will typically issue a legal due diligence questionnaire. This is a detailed document that contains many questions about your company’s legal, operational, and financial position.
What you need to do:
- We will send the questionnaire to you.
- Your responsibility is to work through the list of questions, typing your replies into the document.
- Where documents are requested (e.g. contracts, policies, certificates), you should provide clear scanned copies or identify where documents are unavailable.
- It is important that your replies are accurate, complete, and truthful, as the buyer is relying on this information in making their decision to proceed.
2. Reviewing the Draft Share Purchase Agreement
Once the due diligence stage is underway or completed, we will receive the first draft of the Share Purchase Agreement (SPA) from the buyer’s solicitor. This is the main legal contract for the sale of your shares.
What you need to do:
- We will prepare a written legal report highlighting the key terms of the SPA, identifying any concerns or unusual clauses, and pointing out anything we think you need to consider.
- Your role is to read the report carefully and review the SPA itself.
- You should come back to us with any questions, comments, or points you are unsure about.
- We will also highlight particular parts of the SPA that you should ask your accountant to review — for example, any tax covenants or provisions dealing with completion accounts or earn-outs.
Once you have had a chance to review our comments and obtain any necessary accountancy advice, we will prepare a draft version of the SPA with proposed amendments and additions that reflect your comments and protect your position.
What you need to do:
- Review our suggested changes and let us know if you have any further comments or questions.
- Once you are happy with our proposed version, we will send it to the buyer’s solicitor and negotiate the final wording on your behalf.
A key part of most share sales is the disclosure exercise. This runs alongside the negotiation of the SPA and focuses on matters that could otherwise give rise to a warranty claim by the buyer.
The warranties in the SPA are a series of statements about the company — for example, that it has no disputes, that all contracts are in place, and that all tax has been paid. If any of these statements are not true, you must make a formal disclosure of the relevant facts.
What you need to do:
- We will send you the warranties and ask for your input on any matters which require disclosure.
- We will also ask for your help in compiling supporting documents (called the disclosure bundle) to accompany the disclosures.
- It is very important that the disclosures are accurate, complete, and properly documented. This helps protect you from claims after the sale completes.
There are several points in the process where we will recommend that you take advice from your accountant. While we will deal with the legal side of the transaction, there are tax and financial consequences that fall outside our scope of advice.
What you need to do:
- Speak to your accountant about tax implications of the sale, including any entrepreneurs’ relief/business asset disposal relief, tax indemnities, or earn-out arrangements.
- Ask your accountant to review any financial provisions in the SPA that we identify as needing their input — such as the handling of accounts, tax warranties, or working capital adjustments.
- If we identify any other areas where professional accountancy advice is recommended, please make sure to act on this promptly.
In addition to the SPA, there will be other legal documents that need to be signed and agreed to complete the share sale. These are often referred to as ancillary documents and may include:
- Stock transfer forms (to formally transfer the shares to the buyer)
- Director resignation letters (if you are stepping down from the board at completion)
- Board minutes (to approve the share transfer and resignations)
- Indemnities or other standalone agreements
- Resolutions of the company (as required under the company’s articles)
- We will prepare or review these documents for you.
- You will need to review and sign them — we will explain what each document is for and ensure you are comfortable with their contents.
- We may need your help gathering certain company records or information needed to prepare these documents.
The final stage of the process is signing all the completion documents. In most cases, we will deal with this using electronic signature software.
What you need to do:
- You will receive an email with links to the documents requiring your signature.
- Your responsibility is to carefully check each document before signing, following any instructions we provide.
- We will let you know if there are any documents that must be signed as deeds (which may require a witness), or if there are any hard copy documents that need to be signed in person.
Your Ongoing Role in the Process
A smooth and efficient share sale relies not only on our legal work, but also on your prompt and full co-operation. This includes responding quickly to our requests, providing accurate and complete information, and sending through any necessary documents in a timely manner.
Delays in providing information or documentation can lead to hold-ups in the process, increased costs, or even loss of buyer confidence. To keep things moving and to help ensure the transaction proceeds without unnecessary stress or delay, we ask that you remain proactive and responsive throughout.
Final Note
The sale of your shares is a legal process that requires teamwork. We are here to guide and protect you through the transaction, but your cooperation — especially in relation to due diligence, disclosure, document review, ancillary documentation, and accountant input — is essential.
Please let us know if you have any questions about this guide or any stage of the process. We’re here to help.