Buying an existing business can be a fast route to growth, you acquire customers, staff, premises and cash flow that already exist. But "buying a business" can mean two very different things in law, with different consequences. Here is a plain-English guide for England and Wales.
Two ways to buy: shares or assets
The fundamental choice is how you buy:
- Share purchase (you buy the shares in the company that runs the business. You acquire the company itself, with all its assets and liabilities) known and unknown, including its history, contracts, debts and tax. The business carries on seamlessly under the same legal entity.
- Asset purchase (you buy specific assets of the business, generally choosing which contractual liabilities to assume, leaving the seller's company behind). Note that some liabilities may transfer or arise by operation of law regardless of the parties' intention, most notably employee liabilities where TUPE applies, so an asset deal does not guarantee that all unwanted liabilities are avoided.
This choice drives everything: risk, tax, contracts and employees.
Why the choice matters
- Liability. A share buyer inherits the company's hidden liabilities (a key reason buyers demand strong warranties and indemnities). An asset buyer largely avoids them, but must check that needed assets and contracts actually transfer.
- Employees (TUPE). On an asset sale, TUPE will often apply if the transaction amounts to a relevant transfer within the Regulations, in which case assigned employees generally transfer automatically on their existing terms and information and consultation obligations may arise. Whether TUPE applies is fact-specific and not automatic on every asset sale. (On a share sale, employees stay with the same employer company anyway.)
- Contracts. On an asset sale, key contracts may need to be assigned or novated, and change-of-control consents checked; on a share sale they usually continue (but watch change-of-control clauses).
- Tax. Different consequences for both sides, stamp duty at 0.5% on a share purchase; SDLT on any property in an asset purchase; and reliefs (for the seller, e.g. Business Asset Disposal Relief). Take tax advice early.
Due diligence: look before you leap
Whichever route, the buyer should carry out due diligence (legal, financial, tax and commercial) to verify what it is buying and uncover risks. The findings shape the price, warranties, indemnities and conditions, and may even change whether you proceed.
Regulatory checks
Some acquisitions trigger extra rules:
- National security: the National Security and Investment Act 2021 (NSIA) can require mandatory notification and clearance for acquisitions in sensitive sectors, failing to notify can make a deal void.
- Competition: larger deals may face Competition and Markets Authority (CMA) merger review.
- Sector rules: regulated sectors (finance, etc.) may need regulator approval.
The documents and the deal
Expect a familiar document chain: NDA → heads of terms → due diligence → a Share Purchase Agreement (SPA) or Asset Purchase Agreement (APA) → disclosure letter, tax deed and (for assets) transfers/novations → completion. (See our separate guide on the steps and documents.)
Key takeaways
- "Buying a business" usually means either a share purchase (the company, with all its liabilities) or an asset purchase (chosen assets and liabilities).
- The choice drives liability, tax, contracts and employees. TUPE may transfer staff on an asset sale if there is a relevant transfer, but this is fact-specific and not automatic.
- Do thorough due diligence, and protect yourself with warranties and indemnities (especially on a share purchase).
- Watch regulatory triggers (NSIA 2021 (national security) and CMA merger control) and take tax advice on stamp duty/SDLT and reliefs.
Sources
- Companies Act 2006 (shares and transfers); Stamp duty on shares (0.5%); SDLT (Finance Act 2003) on property in asset deals
- TUPE, Transfer of Undertakings (Protection of Employment) Regulations 2006 (employees on asset sales)
- National Security and Investment Act 2021 (mandatory notification); CMA merger control
--- This article is general information about the law of England & Wales as at 2026, not legal advice. For advice on your circumstances, consult a qualified solicitor.