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In my experience, it is rarely one big issue that trips up a sale. More often, it is something small and overlooked (such as a clause, an old resolution, a gap in the paperwork) that the buyer's lawyers spot and use to slow things down or chip away at price. If you're thinking about selling your business one day, even if "one day" is a few years off, getting the legal groundwork right now pays dividends later. Selling a business isn't just a negotiation on price; it's a legal process, and much of what determines how smoothly (and profitably) that process goes is decided long before a buyer ever appears.
Can you actually sell your shares?
This sounds like an odd question, but it catches people out constantly. If you own shares in a company with other shareholders, your ability to sell the whole company isn't automatic, it's governed by your articles of association and, if you have one, your shareholders' agreement.
Without a drag right, you cannot force minority shareholders to sell alongside you, even where you hold the majority. A single shareholder digging their heels in can hold up (or kill) an otherwise good deal. If your documents are silent on this, it is worth fixing well before you get to mid-negotiation, not during it.
Are your corporate records in order?
Buyers (and their lawyers) will want to see a clean paper trail: board minutes, shareholder resolutions, statutory registers, and confirmation that things like share allotments and director appointments were all done properly at the time. Gaps here don't necessarily kill a deal, but they do slow it down and give a buyer ammunition to chip away at price. Every query raised is a query that costs you time, and often money.
What about your governing documents more broadly?
Beyond drag rights, it's worth checking that your articles actually reflect how you intend a sale to work. Pre-emption rights, can require you to offer shares to existing shareholders before an outside buyer. For example, where you are selling only part of the entire issued share capital you would need to be comfortable that the remaining shareholder is on board and happy to waive their right of pre-emption. Reserved matters are less commonly found in Articles, they are more typically set out in a shareholders' agreement, if you have one. They are worth checking either way, since they can add friction to a transaction if they haven't been considered in advance.
Why now, not later?
None of this is complicated to fix if you deal with it early. It can become considerably harder, and more expensive, to sort out once a buyer is at the table and the clock is running. A tidy structure doesn't just make a sale smoother; it signals to a buyer that this is a well-run business, which has its own quiet value in a negotiation.
Every business is different and the above is a non-exhaustive list of some areas to consider well ahead of a sale process and does not constitute legal advice.
If you would like to discuss any of the above further, please contact Phil: philipmiles@bexleybeaumont.com | 07388 344576
