Buying and selling a hospitality business

Acquisitions and sales

We can help you if you are buying or selling a business and guide you through the process from initial ‘heads of terms’, through due diligence, negotiation of the sale agreement and how payment of the sale price will be made, the warranty and disclosure process to completion. 

Share Sales and Purchases

The deal can be structured as a sale/purchase of the shares in the Company depending what works best for you and the other side.

In this scenario, the sellers will be the shareholders of the “target company” which is being bought and the buyers will take over all the assets and liabilities (including any past tax liabilities). As a result share sale agreement will tend to be longer and more complex. It will usually include a “tax covenant” allowing the buyer to recover any tax owing up to the date that ownership is transferred.

In general terms, buyers, given the choice, will prefer an asset sale (see below) for two reasons:

• the buyer will be able to ‘cherry pick’ what assets they want to buy; and
• the buyer won’t be taking over the tax and any other unpleasant surprises in terms of liabilities of the company.

Sellers on the other hand will usually prefer the sell their shares and so dispose of all the liabilities. Also If they can satisfy the test they may be able to benefit from tax relief on the capital gain on the sale of their shares reducing it to 10% by claiming what used to be called “Entrepreneur’s Relief” (now called “Business Asset Disposal Relief”).

Hospitality business sales and purchases

Where a sale of a hospitality business, either because it is a sale by a sole proprietor or partnership or because only some of the assets and liabilities are being transferred, the sale will be of the business, assets (contracts, equipment, property, employees etc).
The agreement will also deal with what will happen in terms of apportionment of outgoings, creditor and debtors.
The particular features of this type of sale are:

• the values given to goodwill, assets, contracts etc as part of the sale price will be itemised;
• the buyer can ‘cherry pick’ which assets he or she wants to buy in terms of contracts, assets;
• if the business transfers the employees working in it will automatically transfer with it under the Transfer of Undertakings (Protection of Employment) Regulations (known at “TUPE”);
• generally, no VAT is payable on the sale and purchase.

If the sale is by an individual or partnership they may also, depending on the circumstances, may also be able to qualify for Business Asset Disposal Relief.

Structuring of the Sale and the Sale Price

However, the sale is to be structured we can help with the documentation: sometimes there are conditions that have to be satisfied so the parties sign an agreement and only complete the deal when some conditions are satisfied; in other cases, completion of the sale will be when both sides sign. We can help advise on the structuring of you deal.

Also, the parties may agree are that not all the sale price will be paid at once. There may be instalments, amounts deferred or an “earn-out” based on how successful the business sale is following the sale: if this is the case, we can help you with the drafting of these provisions to make sure there is no misunderstanding and you are well protected.

At Wellers Law Group we are ideally placed to advise on company sales and purchases. Our commercial team includes long-standing experts who will structure the transaction, address the personal and business tax issues, assist with commercial property requirements and also employment law. We work in conjunction with your professional advisers and accountants to make all this happen as smoothly as possible.

Please contact Kim Whitaker for an initial discussion on 020 7481 2422 or email kim.whitaker@wellerslawgroup.com.