A Brief Guide On How To Sell Your Company’s Shares/ Assets

Planning to sell your company’s shares/ assets? In this article, we will briefly share with you how to do so.

A brief introduction to sales of shares

Question: What is sold?
Answer: Your shares in the company

Question: Who are the parties involved?
Answer: Yourself, any other shareholders of the company, and any potential buyers. 

Question: What happens after the sale of the shares?
Answer: You will no longer be a shareholder of the company. This means that you will no longer be able to participate in the affairs of the company. The role will be taken over by the person who bought your (and other company shareholders) shares. 

A brief introduction to sales of assets

Question: What is sold?
Answer: Assets, debts, and/or liabilities (i.e. components) of the company. Take note that the shares of the company are considered assets of the company as well in the event that the owner of a sole proprietor company is selling off its business in totality

Question: Who are the parties involved?
Answer: The company itself and any potential buyers.

Question: Are the prerequisites to the sale of the assets?
Answer: Yes. A resolution (between the shareholders of the company) must be passed by the company before you can dispose of the company’s assets (this does not apply to a sole proprietor company). 

Things to bear in mind before selling your company assets/ shares

A) Preliminaries

For sales of shares- make sure (in the process of selling your shares) that you comply with any contractual obligations/ restrictions/ procedures (in relation to the selling of your shares) that were pen down in the shareholder agreement or company’s constitution.

For asset sale- determine what assets need to be disposed of asap/ what assets are excluded from the asset/ what assets are to be retained/ what assets are to be sold between you or the company and the potential buyer before finalizing the sale share agreement.

B) Further consideration

1. Have you (and the buyer) notified the necessary professionals (lawyers, company secretary, accountant, etc.) to assist you on the matter? 
2. Have you prepared the necessary preliminary agreements (Memorandum of Understanding, Terms Sheet, Letter of Intent, etc.) that could assist both parties in managing their expectations before entering into the main agreement? 
3. Have you conducted due diligence on your company? This would also help in managing the expectation of a potential buyer of the shares/ assets. The seller knows what they are getting and this would also prevent you from being sued by the seller for failing to disclose any adverse information that might affect the seller after the seller has signed the agreement.
4. Have you obtained a valuation report in regard to the value of your company? 
5. Do you have the authority to sell the shares/ assets?
6. Have you provided accurate information in relation to the shares/ assets you are selling?

C) Signing phase

For both instances:

1. Prepare a non-disclosure agreement (NDA). This is to protect your company’s assets from being siphoned off by the buyer at your company’s expense.
2. Insert in conditions precedents (into the agreement) in relation to the completion of the transaction. This is to ensure that in the event the deal falls through because of certain unforeseen events, there is a gentleman agreement between both parties to walk away without incurring any (other than some minor penalties) severe repercussions.

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