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Share Sales vs Business Sales (Part 2): Choosing a Structure - Tax Is Not the Sole Consideration
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Key Insights
Tax is important, but it is not the whole deal. A transaction structure that appears attractive from a tax perspective may still create liability or practical transaction issues. Buyers and sellers need to consider the broader position, including due diligence findings, liability exposure and how the contract will allocate risk.
Due diligence should happen before the structure is locked in. The episode highlights the importance of due diligence at the outset. What is discovered during due diligence can affect how the transaction should be structured and what contract terms need to be negotiated before the agreement is finalised.
The contract is where liability is managed. Once the structure is chosen, the sale contract becomes critical. Lawyers draft and negotiate the contract to limit their client’s liability and address the risks identified during the transaction. The structure matters, but the drafting determines how much risk each party actually carries.
A better tax outcome is not always the best transaction outcome.
In Part 2 of this Explain That series on Share Sales vs Business Sales, Andrew Henshaw is joined by Lauren Gross to discuss the practical issues that can arise when choosing between a share sale and a business sale.
Using a case study involving a furniture manufacturing share sale, the episode explores why transaction structure needs to be considered from more than one angle. Tax can be important, but buyers and sellers also need to consider due diligence findings, liability risk and how the contract will be drafted and negotiated.
The discussion covers:
- why tax is not the only consideration when choosing a transaction structure;
- practical issues from a furniture manufacturing share sale case study;
- how due diligence at the outset can affect the transaction;
- why buyers and sellers need to understand liability risk;
- how lawyers draft and negotiate contracts to limit client liability; and
- why transaction structure should be considered before the parties commit to final terms.
Following Part 1, which introduced the differences between share sales and business sales, this episode looks at how those differences play out in practice when parties are choosing the most appropriate structure for a transaction.
A practical discussion for business owners, buyers, sellers and advisers considering whether a transaction should proceed as a share sale or business sale.
For advice on share sales, business sales, due diligence, transaction structuring or sale contract negotiation, contact Velocity Legal’s Commercial team.
This podcast in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this podcast.
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