Share sales

In a share sale, ownership of the company owning the target business is transferred to the buyer. Unlike an asset sale, the target company retains its assets and continues to operate its business.

There are tax advantages and disadvantages of a share sale for both parties.

The tax consequences of a share sale are generally less complex for a seller than those triggered by an asset sale. From the buyer's perspective, a share purchase will transfer the company, complete with its tax history and its contingent and potentially unexpected tax liabilities and exposures. This should encourage a buyer to conduct a thorough due diligence exercise and any issues identified should be addressed by obtaining appropriate warranties and/or specific tax indemnities or, depending on the nature and quantum of the potential liability, be reflected in the transaction price.

For further details of some of the key tax considerations, advantages and disadvantages of structuring the sale of a business as a share sale, see Practice Note: Share sale or asset sale—tax considerations.