Buying or Selling a UK Business in 2026: Your Complete Legal Checklist

Buying or Selling a UK Business in 2026: Your Complete Legal Checklist
Buying or selling a business is one of the most significant transactions most business owners will ever undertake. It is also one where the legal work can make the difference between a deal that delivers what you expected and one that results in years of dispute, unexpected liabilities, or a significant financial loss.

Whether you are a buyer looking for your first acquisition or a founder seeking to exit a business you have spent years building, this guide explains the key legal steps — and the issues that most commonly go wrong.

Buying a Business: Share Sale or Asset Purchase?

The first major legal question in any business acquisition is how the deal is structured: as a share sale or an asset purchase.

In a share sale, the buyer acquires the shares of the company that owns the business. The company — with all its assets, contracts, employees, liabilities, and history — transfers as a whole. The buyer steps into the shoes of the existing shareholders.

In an asset purchase, the buyer acquires specific assets of the business — contracts, intellectual property, stock, equipment — but not the company itself, and not (generally) its pre-existing liabilities. The seller retains the company, which may then be wound down.

The choice has significant implications for both parties in terms of tax, liability exposure, employee rights, and contract assignment requirements. For buyers, an asset purchase is often preferred because it allows them to “cherry pick” assets without inheriting unknown liabilities. For sellers, a share sale is often preferred because of the availability of certain capital gains tax reliefs. But neither is universally better, and the right structure depends on the specifics of the deal.

Due Diligence: Why It Matters So Much

Due diligence is the process by which the buyer investigates the target business before completing the transaction. It is not a bureaucratic formality — it is how you find out what you are actually buying.

Legal due diligence covers:

  • Contracts — reviewing the target’s key commercial contracts to identify change of control clauses (which may require third-party consent to the sale), onerous terms, or unusual liabilities

  • Employment — understanding the workforce, employment contracts, and any existing disputes or claims

  • Intellectual property — confirming that the business actually owns or properly licenses the IP it relies on

  • Real estate — if the business occupies property, reviewing the title and any lease obligations

  • Litigation — identifying any current or threatened claims

  • Regulatory compliance — particularly in regulated sectors, confirming that the business has the licences, registrations, and compliance history it claims

  • Corporate structure — confirming the ownership structure, share history, and any encumbrances on shares

The findings from due diligence feed directly into the negotiation of the Sale and Purchase Agreement (SPA) — and into the decision of whether to proceed with the deal at all.

The Sale and Purchase Agreement

The SPA is the central legal document in any business acquisition. It sets out:

Price and payment terms — including any earn-out provisions (where part of the price is paid after completion, typically linked to future business performance). Earn-outs are common where there is a difference of view between buyer and seller about what the business is worth, but they require very careful drafting to be enforceable.

Conditions to completion — the steps that must happen before the deal can complete. These may include regulatory approvals, third-party consents, or financing conditions.

Warranties — these are statements of fact made by the seller about the business. If a warranty is incorrect and the buyer suffers loss as a result, the buyer can claim against the seller. Warranties are the buyer’s protection against hidden problems.

Indemnities — where there is a specific known risk (for example, a pending tax investigation or a known dispute), the seller may be asked to give an indemnity — a promise to pay the buyer a pound-for-pound sum if that liability materialises.

Restrictive covenants — most business sale agreements include restrictions on the seller — preventing them from competing with the business they have just sold, or soliciting its customers and employees, for a defined period after completion.

Employment Obligations: TUPE

If the acquisition involves employees transferring to the buyer, the Transfer of Undertakings (Protection of Employment) Regulations 2006 — known as TUPE — will almost certainly apply. TUPE protects employees’ employment rights on the transfer of a business, meaning that employees transfer on their existing terms and conditions and the buyer inherits all liabilities related to those employees from the date of transfer.

This is a significant consideration for buyers. It means that, in an asset purchase of a business, you do not avoid inheriting employment liabilities simply by buying assets rather than shares — if employees transfer with the business, TUPE applies.

Common Mistakes — and How to Avoid Them

The deals that go wrong most commonly do so because of:

  • Insufficient due diligence — completing without properly understanding what you are buying

  • Poorly drafted earn-outs — which lead to disputes about whether performance targets were met

  • Inadequate warranty disclosure — sellers who are not properly advised on what to disclose, leaving them exposed to warranty claims after completion

  • Missing change of control consents — discovering after completion that a key contract has been terminated because no consent was obtained

  • TUPE surprises — buyers who discover post-completion that they have inherited employment liabilities they did not know about

Saracens Solicitors: Business Sale and Acquisition

Our corporate team advises buyers and sellers at every stage of business transactions — from initial structuring and due diligence through to negotiation, completion, and post-completion matters. We work with businesses across all sectors, including technology, financial services, retail, professional services, and real estate.

We understand that a business transaction is not just a legal exercise — it is a significant commercial and personal event. We work to get your deal done efficiently, protect your interests, and make sure you know exactly what you are signing up to.

 

This blog is for general information only and does not constitute legal advice.

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