Selling a company as a sole shareholder and director (2024)

Do you have a company that’s doing well… and every now and then you’re thinking to yourself… should I sell my business? Should I be thinking about selling my business? And, if I did, what would the process even be?

Well, in this video, we’re going to tell you some of those key considerations that you should be factoring in. We’ll also look at some of the practical elements, in how the process would actually be undertaken.

So, if you own a company, and you’re thinking of selling it – STOP. Don’t do anything until you watch this.

Hi there, Nicholas Campion here from 1^st Formations with another edition of Whiteboard Thursday.

If you are the sole shareholder and director of a private limited company, you can sell the business and all of its assets at any time, if you no longer want to own and manage it. There are, however, a number of important factors and responsibilities to take into consideration before you sell your business.

First of all, let’s take a look at some initial considerations.

Most people will only sell a business once or twice in their lifetime – so it is really not something to rush into without fully understanding the process, and whether this is the right time to get the best return for your hard work.

Now, to ensure your business appeals to prospective buyers, you should be able to demonstrate a consistently strong financial performance over the past two or three years, at the very least.

You should also consider other factors, such as the value and current profitability of your company and its assets; the brand, image, and reputation of your business; your client relations and retention rates; sales history and future earnings forecasts; and potential risks for the buyer due to a change in management.

It may also be worthwhile getting your accountant or a specialist to value your business before making a commitment to sell, as this will reduce uncertainty and help set your expectations at a realistic level.

Number 2 – The process of selling your company shares

If a company has other investors, that is shareholders, you cannot simply sell it without their approval. However, you can remove yourself from the company by selling your own shares and resigning as a director.

If, on the other hand, you are the sole director and shareholder, you will not have to consult with anyone else before making the decision to sell some or all of your shares, but you must take a look at the current market and economic conditions to determine whether it is the right time to sell.

You should also think about the potential Capital Gains Tax you may have to pay from the profit of the sale.

To sell your shares, you will need to complete a Stock Transfer Form with the details of the transfer of shares.

If a company has other directors and shareholders, they will need to approve the transaction as well, to waive their pre-emption rights (if applicable); however, as you’re the only director and shareholder, you alone can approve the transfer of shares to the new owner. Depending on how much money is changing hands for the shares – stamp duty may be payable to HMRC, who would then also need to stamp or approve the Stock Transfer Form.

You may find that a new owner wants you to remain as a director or shareholder for a period following completion of the sale. This is becoming increasingly common because it allows the new management to learn more about the business during a handover period.

It also provides clients and suppliers with a sense of security and continuity, thus reducing any potential risk for the new owner.

Number 3 – Satisfying due diligence checks

Serious potential buyers will appoint solicitors and accountants to carry out due diligence checks on your company before completing the sale. This is to ensure that your business is sound and presents minimal risk to the buyer. They will use this information to make an informed decision.

They may modify the terms of the sale according to the information that is gathered. You will be expected to show profit and loss accounts, company tax returns, lease agreements, details of any outstanding loans and liabilities, and any payments or credits due from suppliers and clients.

To satisfy these due diligence checks, your accounting records must be up-to-date and present a true and fair view of your company’s financial position.

Your annual accounts and tax returns should also be in order. You must finalise, or be in the process of settling, all outstanding liabilities with HMRC, creditors, suppliers, and employees. You should also be able to account for all credits or liabilities associated with existing clients.

Number 4 – Keeping things on a need-to-know basis

It’s best not to inform your staff, suppliers, and competitors that you are planning to sell your company until everything is in order. Their reactions could negatively impact your company’s profitability.

When the time is right, you should notify your employees about why and when the business is being sold, and whether they are receiving a redundancy package or being kept on by the new owner after the company is sold.

It is also recommended that you not give too much information to potential buyers before carrying out detailed checks and putting non-disclosure agreements in place.

Number 5 – Notifying Companies House when you sell your company

You should notify Companies House about the sale of your business by updating the registered details of your company. To do this, you will need to:

• First, appoint a new director. This must be done before you resign because private companies are legally required to always have at least one appointed director. Once the appointment has been completed, you’ll need to submit an AP01 form to Companies House.
• Next, you’ll need to report your resignation as a director on form TM01.
• Finally, update the shareholder details and shareholdings by filing a confirmation statement

This information will be updated on the Companies House public register, and you must also make sure the company’s statutory registers of directors, members, and people with significant control are updated accordingly.

And finally, number 6 – Satisfying the requirements of HMRC

If your company is registered for VAT, you can transfer the VAT registration to the new owner.

When the business has been sold, you will need to complete a Company Tax Return to cover the accounting period up to the date of the sale. You will also need to pay Corporation Tax on profits made during that time, including chargeable gain from the sale of business assets.

A Self Assessment tax return should be filed by the appropriate deadline to report your personal income and tax liability.

HMRC requirements can be a complex affair when selling a business, so we would advise appointing an accountant to assist with this process, to ensure that everything is carried out properly.

And there you have it. In this video, we’ve discussed selling a company as a sole shareholder and director, from the important first steps and considerations, through to satisfying the statutory requirements of Companies House and HMRC.

We strongly recommend that you consult an independent, specialist business advisor for professional advice and guidance, before taking any steps or making a firm decision to sell your company.

If you have any questions, please leave them in the comments section below, and in the meantime be sure to subscribe to our channel to get more advice on limited companies, reporting requirements, and tax obligations.

We’re always happy to hear from you, and we cannot wait to help. Until next time, cheerio.

Author:1st Formations

John Carpenter, our Chief of Staff, ensures the services our company provides are delivered to the highest possible standard. John has a wealth of varied management experience, having previously worked in a boutique financial law firm and a financial claims company. In his spare time, John visits football grounds around the UK, reads history books, and is a proud cat owner.

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