Acquiring Business Assets
Generally, as a buyer, you would prefer to purchase business assets only rather than the shares in the company that owns them. Assuming that you have been successful in negotiating an acquisition on that basis, you must consider how such types of assets must be treated:
Premises: If you are acquiring freehold premises from the seller you may wish to reduce the initial capital outlay by taking a lease from him and paying rent rather than buying the freehold. If you are acquiring the seller's leasehold interest, you will need to satisfy yourself as to the suitability of the terms of the lease and that his landlord's consent to the assignment to you can be obtained. Continuing or periodic liabilities, in particular rent and business rates, will normally be apportioned between you and the seller at the completion date.
Plant, Stock and WIP: Plant and equipment, stock in trade and work in progress, will normally be included in the sale and you should satisfy yourself as to their valuation and the condition of the plant and equipment. Book debts normally remain with the seller though you may agree to collect them on behalf of the seller (as his agent) if it is more convenient to do so in the course of continuing the business.
Contracts: If you are considering acquiring trading or hire purchase contracts you will firstly need to ensure that they are favourable; that payments due from the seller of the business are not overdue; that outstanding obligations under those contracts are accounted for; and that, either the other party to the trading contract has consented to you taking over the contract or a novation agreement has been signed between the buyer, seller and the other party.
Tax Issues: Tax liabilities (except Stamp Duty Land Tax (SDLT)) will remain the seller's responsibility. There will need to be negotiation to ensure that a fair balance is achieved in the light of such liabilities. The seller will wish to minimise his chargeable capital gain on assets sold and a high work in progress or stock figure may increase his corporation tax bill.
Entitlement to the benefit of capital allowances may well also be a negotiating point. As the buyer, if premises are acquired then there will usually be a land transaction i.e. an acquisition of a "chargeable interest" over land on which SDLT will be payable. The SDLT will be charged at a rate of 0%, 1%, 3% or 4% depending on the value of the land transaction.
Legally-Imposed Obligations: There will be certain other liabilities which will pass to you regardless of the terms of the contract, such as environmental liabilities and TUPE obligations in respect of employees when you are buying a business as a going concern.