This is the seventh and final part in a series of seven blogs that outline the process of how to sell a company – before, during and after the negotiation and signing of the share sale and purchase agreement.
In this Part 7 of the series, we focus on:
- how to prepare for completion; and,
- what to think about post-completion, after the buyer has become the new owner of the target company.
Follow the link to read Part 6: Signing the Transaction Documents.
Completion
Once the seller and buyer have agreed the terms of the transaction documents they will be ready to complete the deal. Completion has two stages – exchange and completion:
- exchange is when the seller and buyer commit to the transaction by executing (please see Part 6 of this blog series) the share purchase agreement ("SPA") and ancillary documentation (please see Part 3 of this blog series) and exchange the signed documents with each other
- completion is when all the required legal formalities to affect the sale and purchase of the target company are completed and the seller transfers legal title in the shares to the buyer and, in return, the buyer pays the consideration to the seller.
Typically, exchange and completion are carried out simultaneously. However, depending on the nature of the transaction this will not always be possible. For example, sometimes there will be conditions to be fulfilled by the seller before the transaction can complete, such as the satisfaction of merger control conditions or the assignation of a lease may require landlord's consent. In these circumstances there will be a split exchange and completion to provide time for the conditions to be fulfilled so that completion may take place.
At exchange, in addition to the seller signing the SPA and delivering it to the buyer, the seller will also deliver any other ancillary documents that are required in terms of the SPA, these usually include (amongst others) a disclosure letter, stock transfer form, a power of attorney (to allow the buyer to control the shares in the target company while waiting for the stock transfer form to be stamped and the register of members to be written up), board minutes and resolutions.
It used to be that completion meetings took place in person with all parties, lawyers and accountants meeting to sign and exchange the transaction documents. However, completions now tend to take place remotely via an electronic signing platform (e.g. DocuSign), email and/or use of a video conferencing platform.
Post-completion
Generally, most of the post-completion tasks are carried out by the buyer to help ensure that it is registered as the legal owner of the shares in the target company and that it, or persons of its choosing, are in full control of the company. In general, the three main post-completion tasks for the buyer are:
- Stamp duty: on a share purchase, if the purchase price exceeds £1,000 stamp duty is payable at a rate of 0.5% rounded up to the nearest £5 and must be paid within 30 days of completion. In share purchase transactions, the stock transfer form(s) should be submitted to HM Revenue and Customs ("HMRC") Stamp Office for stamping, together with any stamp duty that is due. Similar to many completion meetings, the stamping process – the submission of the stock transfer form(s) and payment of stamp duty – is now usually carried out electronically/online.
- Statutory registers: following completion, the target company's statutory registers will need to be updated. Most of the registers can be updated as soon as completion has taken place, such as the register of directors, secretaries, and the register of persons with significant control. The register of members (and register of transfers if there is one), however, can only be updated after the stock transfer form(s) have been stamped by HMRC.
- Companies House filings: usually, the target company will need to file forms with Companies House to notify the Registrar of changes required to be made to the public register in connection with the transaction. Importantly, any forms to be filed must be filed within the prescribed statutory time limits. Again, this process is usually carried out electronically with the necessary forms being filed via WebFiling, for example:
- Change of registered office address (Form AD01);
- Appointment of director(s) (Forms AP01 and AP02);
- Appointment of company secretary (Forms AP03 and AP04);
- Resignation of director(s) (Form TM01);
- Resignation of company secretary (Form TM02);
- Notice of individual person or RLE with significant control (Forms PSC01 or PSC02);
- Notice of ceasing to be an individual person with significant control or relevant legal entity (Form PSC07);
- Change of accounting reference date (Form AA01); and
- Notice of change of company name (Form NM01).
How Brodies can help
The importance of the completion process in a transaction cannot be understated and utmost care and thought should be applied to this part of the transaction process. If you would like to discuss anything raised in this blog in more detail please do not hesitate to get in touch with a member of Brodies Corporate team listed below or your usual Brodies contact.
View our downloadable guide, "Taking the blinkers off when selling your business", by Neil Ritchie, Director of Personal Tax, on what to watch out for from a personal perspective when selling your business.