What is a Share Sale; an SME guide

kamfaulkner
Oct 3
3 min read

Thinking of selling (or buying) a business? You might have heard the term "share sale", but what does it really mean?

If the business is run through a company, a share sale is one of the two main ways to transfer ownership. It's often simpler for the seller, but it can carry more risk for the buyer. Here's what SME owners and acquirers need to know.

What is a share sale?

A share sale is when the owner(s) of a limited company sell their shares in the company to a buyer. The buyer acquires the shares, and with them, ownership of the company and everything it owns.

The company itself doesn’t change.
The contracts, staff, assets, and liabilities stay in place.
The buyer effectively steps into the shoes of the old owner(s).

In short: The legal entity continues; only the ownership changes.

Why choose a share sale?

However, buyers need to tread carefully.

You can read more about the differences between share sales and asset sales in our full guide here: Share Sale vs Asset Sale: A practical guide for SME buyers and sellers

Key features of a share sale

Area	What happens in a share sale
Legal structure	Buyer purchases shares in the company
Who’s the seller?	The individual shareholders
What transfers?	The company, including all assets, liabilities, contracts, employees
Stamp duty	Payable at 0.5% on the purchase price of the shares
Employees	No change (employer stays the same)
Contracts & leases	Usually continue, unless they have change-of-control clauses

Risks and considerations for buyers

While a share sale can be efficient, it also means the buyer inherits all of the company’s liabilities.

This includes:

Unpaid tax
Pending legal claims
Employment issues
Contractual disputes

That’s why due diligence matters (see Due Diligence in business sales and purchases: A practical guide for SME buyers and sellers ).

Buyers will often want strong warranties and indemnities in the sale agreement to protect against hidden liabilities.

When is a share sale the right choice?

A share sale is usually the default choice when the whole company is being sold, and the buyer is happy to take on the company structure as it is.

Common in:

Owner-managed businesses with simple structures.
Continuity-sensitive industries (e.g. regulated businesses, care homes, specialist suppliers).
Time-sensitive deals where transfer of assets would be slow or complex.

When is an asset sale better?

A share sale might not be suitable if:

The buyer only wants part of the business.
There are historic issues the buyer doesn’t want to inherit.
The company owns high-risk assets or has unknown liabilities.

In those cases, an asset sale may offer more control.

Tax on a share sale (2025/26 and beyond)

What to watch out for

Get these checked early.

Summary

A share sale is a clean way to sell or buy a business, but it comes with risks. For sellers, it offers a tax-efficient, low-disruption exit.

For buyers, it offers continuity, but you’ll need thorough due diligence to avoid surprises.

Thinking of buying or selling a company? Talk to us first:

📩 info@orbitlegal.co.uk | 📞 0115 6777095 |

Disclaimer

This content is for general information only and doesn’t constitute legal, accounting, financial, or tax advice. It’s based on the law of England & Wales and was correct at the date of publication, but the law and guidance can change. Reading this page doesn’t create a solicitor–client relationship with Orbit Legal. Please take advice on your specific circumstances before acting. Get advice for your situation by contacting Orbit Legal at info@orbitlegal.co.uk or 0115 6777095.