TRW & Co · M&A and private capital
Share Purchase or Asset Purchase? Structuring a UK Acquisition
In the share purchase vs asset purchase choice, a share buyer acquires the whole company with its history and liabilities, while an asset buyer takes only chosen assets and agreed liabilities. Share deals are usually simpler and often suit sellers; asset deals give buyers more control over risk but need more consents. A hive-down can combine the two.
Key pointAn asset deal does not leave every liability behind: TUPE moves employees and their liabilities, and every contract needs assignment or novation, so the consent count often decides the structure.
At a glance
Shares: company moves
The company stays the same legal entity with all its assets, contracts, employees and liabilities; only ownership changes, so contractual protection is essential.
Assets: pick and choose
The buyer selects assets and agreed liabilities, but each contract, lease, licence and IP right must be transferred individually, often with consent.
TUPE on asset deals
On a business transfer, employees usually move automatically to the buyer with their terms and continuity of employment preserved under the 2006 Regulations.
Transfer taxes differ
HMRC guidance sets duty on share purchases at 0.5%, while asset deals can attract Stamp Duty Land Tax on property and VAT unless a TOGC applies.
Hive-down as a bridge
Transferring the business to a clean subsidiary and selling its shares gives the buyer a clean company, though consents and tax clawbacks still need managing.
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The short answer: share purchase vs asset purchase
In the share purchase vs asset purchase choice, the buyer of shares acquires the company itself, with all its history, contracts, employees and liabilities, while the buyer of assets picks the specific assets and liabilities it wants and leaves the rest behind. Share deals are usually simpler to complete and often more tax-efficient for sellers; asset deals give buyers more control over risk but need more consents and transfer formalities.
Neither structure is automatically better. The right answer depends on the target's liabilities, how many contracts and licences need third-party consent, the tax position of both sides, and whether the business is solvent. Where neither pure option works, a hive-down can combine elements of both.
This guide compares the two under English law and explains how the choice affects diligence, documentation and the wider M&A process.
How each structure works
Share purchase
In a share purchase, the buyer acquires the shares in the company that owns the business. The company remains the same legal entity: it continues to own its assets, employ its staff and be party to its contracts. Only its ownership changes.
The document is a share purchase agreement (SPA), supported by a disclosure letter. Because the company's liabilities stay with it, and therefore indirectly with the buyer, the buyer relies heavily on due diligence, warranties, indemnities and a tax covenant.
Asset purchase
In an asset purchase, the buyer acquires selected assets from the company, such as goodwill, equipment, stock, intellectual property, contracts and property, and agrees which liabilities it will assume. The seller company remains in existence, keeps the sale proceeds and keeps any liabilities not transferred.
The document is an asset purchase agreement (APA). Each asset must be transferred by the appropriate method: assignment or novation of contracts, a transfer of registered IP, a transfer of title to property, and delivery of physical assets.
Documents and completion steps
A share deal typically needs the SPA, disclosure letter, tax covenant (often within the SPA), stock transfer forms, board minutes, resignations and any new service agreements. After completion the buyer pays stamp duty, updates the register of members and makes Companies House filings, including changes to officers and people with significant control.
An asset deal typically needs the APA, disclosure letter, deeds of assignment or novation for contracts, IP assignments that can be recorded at the Intellectual Property Office, property transfers or lease assignments, TUPE information and consultation records, and VAT and SDLT returns. The longer document list is one reason asset deals usually take more time and cost more to complete.
Share purchase vs asset purchase: key differences compared
The table summarises the main points that drive the share purchase vs asset purchase decision for a typical solvent UK company.
| Issue | Share purchase | Asset purchase |
|---|---|---|
| What is acquired | The company, with all assets and liabilities | Selected assets and agreed liabilities only |
| Historic liabilities | Remain in the company (buyer bears them indirectly) | Stay with the seller unless assumed, subject to TUPE and some statutory exceptions |
| Employees | Employer does not change; TUPE does not apply to the share sale itself | TUPE usually transfers employees automatically on existing terms |
| Contracts | Continue, but change-of-control clauses may be triggered | Need assignment or novation, often requiring counterparty consent |
| Transfer taxes | Stamp Duty or SDRT on the shares | Stamp Duty Land Tax on land; VAT unless a transfer of a going concern |
| Seller tax | Gain arises to the selling shareholders | Gain arises in the company; extracting proceeds can create a second tax charge |
| Complexity | Usually simpler to complete | More documents, consents and transfer formalities |
Liabilities, risk allocation and employees
Liabilities and risk allocation
The main attraction of an asset deal for a buyer is the ability to leave liabilities behind. Historic claims, tax exposures and contractual disputes generally remain with the seller company unless the APA says otherwise.
That protection has limits. Employment liabilities transfer under TUPE. Environmental liability can attach to land regardless of who caused the contamination. And a buyer that takes over contracts by novation takes on the obligations under them going forward.
In a share deal, the buyer protects itself contractually rather than structurally. That means detailed diligence (see our legal due diligence checklist), robust warranties and indemnities, and often warranty and indemnity insurance, escrow or deferred consideration so that claims can be satisfied.
TUPE and employees
The Transfer of Undertakings (Protection of Employment) Regulations 2006 are central to the share purchase vs asset purchase comparison. According to government guidance on TUPE, when TUPE applies, employees' jobs usually transfer to the new owner with their terms and conditions and continuity of employment.
On a share sale, the employer stays the same, so TUPE does not apply to the share transfer itself. On an asset sale of a business, TUPE usually applies: employees assigned to the business transfer automatically, together with most associated liabilities. Both seller and buyer have information and consultation duties, and dismissals because of the transfer can be automatically unfair unless an economic, technical or organisational reason applies.
Employment law is also changing. The Employment Rights Act 2025 received Royal Assent on 18 December 2025 and is being commenced in stages; buyers should check which changes affect the workforce they are acquiring. See our TUPE transfer guide.
Third-party consents and tax
Consents
In a share deal, contracts stay with the company, so consent is only needed where a contract contains a change-of-control clause. In an asset deal, every contract to be transferred must be assigned (if it permits assignment) or novated (with the counterparty's agreement). Leases usually need landlord consent to assignment. Licences and permits may not be transferable at all, requiring fresh applications.
Stamp duty, SDLT and VAT
HMRC's guidance on tax when you buy shares states that share purchases usually attract tax or duty of 0.5%, with Stamp Duty payable on a stock transfer form where the transaction is over £1,000. In an asset deal, Stamp Duty Land Tax applies to land and buildings, and rates on commercial property can make this materially more expensive than duty on shares.
VAT may apply to an asset sale unless it qualifies as a transfer of a going concern (TOGC); HMRC sets out the conditions in VAT Notice 700/9.
Seller and buyer tax position
Sellers often prefer a share sale because the gain arises directly to them and may qualify for reliefs. On an asset sale, the company realises the gain and the owners face a further tax charge when they extract the proceeds. Buyers sometimes prefer assets because they may obtain tax relief on the price paid for certain assets. These positions should be modelled by tax advisers early; see transactional tax.
Run the consent count before choosing the structure. If the business depends on dozens of contracts or licences that cannot be assigned without consent, an asset deal may be impractical on the desired timetable, even if it looks attractive on liability grounds. A share deal with targeted indemnities can be the faster and safer route.
When a hive-down bridges the two
A hive-down involves the seller transferring the business it wants to sell into a new subsidiary, then selling the shares of that subsidiary to the buyer. The buyer gets a clean company containing only the chosen assets and liabilities, while the transaction is completed as a share sale.
- Incorporate a new subsidiary. The seller sets up a clean company with no trading history.
- Transfer the business. The selected assets, contracts and employees are transferred into the subsidiary under a hive-down agreement. TUPE will usually apply to this intra-group transfer.
- Obtain consents. Consents to assignment or novation are still needed at the hive-down stage, so the consent burden is not avoided.
- Check tax reliefs and clawbacks. Intra-group reliefs may be available on the hive-down, but some can be withdrawn if the subsidiary leaves the group within a set period; model this with tax advisers.
- Sell the shares. The buyer acquires the subsidiary under an SPA, with warranties focused on the period since the hive-down.
Hive-downs are common in carve-outs from larger groups and in insolvency sales, where an administrator transfers the business to a clean subsidiary before selling it.
An illustrative scenario
Illustrative only; the parties are generic. A buyer wants to acquire a UK manufacturing business. The seller company has a historic product liability claim and a defined benefit pension scheme the buyer does not want to take on, so an asset deal looks attractive. But the business depends on a long-term supply contract with a customer that prohibits assignment without consent, and the factory lease requires landlord consent.
The parties weigh the share purchase vs asset purchase options and agree an asset deal, with customer and landlord consents as conditions. The APA excludes the pension scheme and product liability claim, TUPE consultation runs in parallel, and the seller retains enough proceeds to meet the excluded liabilities.
Had the customer refused consent, the analysis would have changed. The buyer could have switched to a share purchase with a specific indemnity for the product liability claim, but the pension scheme would then have come with the company. That is why the consent position was tested with the customer informally before heads of terms were signed, rather than discovered during drafting.
Risks and common mistakes
Assuming an asset deal leaves all liabilities behind
Buyers sometimes assume an asset deal is risk-free. In fact TUPE transfers employment liabilities, some environmental liabilities attach to land, and novated contracts bring their future obligations. Courts may also scrutinise transactions designed to avoid creditors. Diligence remains necessary, and the APA should allocate transferring liabilities clearly, with indemnities from the seller for pre-transfer matters.
Underestimating consents
In an asset deal each contract, lease and licence must be dealt with individually. Counterparties may refuse consent, demand new terms or use the opportunity to renegotiate. Start the consent process early, prioritise the contracts that matter most, and consider interim arrangements, such as subcontracting or holding contracts on trust, where consent cannot be obtained before completion.
Ignoring change-of-control clauses in a share deal
A share deal does not avoid consents entirely. Many finance agreements, leases, joint venture agreements and key customer contracts contain change-of-control provisions that allow termination or require consent. Identify these in diligence and decide whether waivers are a condition to completion or a price risk the buyer is willing to take.
Leaving tax modelling too late
The tax consequences of the share purchase vs asset purchase choice can be significant for both sides, and often shift the price. Leaving tax analysis until after heads of terms risks a renegotiation. Model the seller's and buyer's positions, including transfer taxes, VAT and any reliefs, before the structure is agreed.
Forgetting what is left behind in the seller
After an asset sale, the seller company still exists with its excluded liabilities and the sale proceeds. If the price is distributed to shareholders before creditors are paid, directors can face personal exposure, and the buyer may face arguments that the transaction was at an undervalue. Sellers should plan how excluded liabilities will be met and how the company will eventually be closed, whether through a members' voluntary liquidation or otherwise.
Cross-border and distressed sales
Where the target group has foreign subsidiaries, a share deal at the top level transfers the whole group in one step, which is usually far simpler than transferring assets in several countries. Local merger control, investment screening and employment rules still apply.
In distressed sales, asset deals dominate. An administrator typically sells the business and assets with limited warranties, and TUPE has modified effect in some insolvency situations. Our restructuring and insolvency team advises buyers on distressed acquisitions.
Distressed asset purchases carry their own risks. Administrators rarely give meaningful warranties, so the buyer relies on its own diligence and price. If the buyer is connected to the company's directors or shareholders, additional rules apply to sales shortly after the company enters administration, including the option of an independent evaluator's report. And where the seller is overseas, the buyer should confirm that the seller has authority under its own law to transfer the assets and that no local insolvency proceedings could unwind the sale.
What to do next
- Identify the liabilities the buyer most wants to avoid.
- Count the contracts, leases and licences needing consent under each structure.
- Model transfer taxes, VAT and both parties' tax positions.
- Assess TUPE implications and consultation timing.
- Consider a hive-down where neither pure structure works.
As a rule of thumb, a share purchase often suits a clean, well-documented company with many contracts and licences, sellers who want a full exit and a group with overseas subsidiaries. An asset purchase often suits a business with significant unwanted liabilities, a buyer taking only part of a business, or a sale out of insolvency. In between, the share purchase vs asset purchase answer turns on how much risk can be managed contractually and at what cost.
Getting the share purchase vs asset purchase decision right early saves time and cost later. To discuss your transaction, contact our London office or see our buying and selling a business page.
Frequently asked questions
01Is it better to buy shares or assets?
It depends on the deal. Buying shares is usually quicker and simpler because the company keeps its contracts, employees and licences, but the buyer inherits all historic liabilities and must rely on diligence, warranties and indemnities. Buying assets lets the buyer choose what it takes and leave most historic liabilities behind, but requires more consents and transfer formalities, and TUPE still moves employees. Tax, the number of consents needed and the target's risk profile normally decide the answer.
02Why do sellers usually prefer a share sale?
On a share sale the gain arises directly to the selling shareholders, who may be able to claim reliefs, and the sellers walk away from the company and its liabilities, subject to warranties and indemnities. On an asset sale the company realises the gain and the owners may face a second tax charge when they extract the proceeds. The seller company also keeps any liabilities not transferred and must deal with them, often through a later liquidation.
03Does TUPE apply to a share sale?
No, not to the share transfer itself. On a share sale the employer remains the same company, so there is no change of employer for TUPE to regulate. Employees' contracts continue unchanged. TUPE may still be relevant if the buyer later integrates the business by transferring it to another group company, or if a hive-down is used before the sale. On an asset sale of a business, TUPE usually applies and employees transfer automatically.
04Is stamp duty payable on an asset purchase?
Stamp duty on shares does not apply to an asset purchase, but Stamp Duty Land Tax applies to land and buildings transferred, and rates on commercial property can be significant. VAT may be chargeable on the assets unless the sale qualifies as a transfer of a going concern under HMRC's conditions. On a share purchase, HMRC guidance states duty is usually 0.5%, with Stamp Duty payable on paper transfers where the transaction is over £1,000.
05What is a hive-down?
A hive-down is where a seller transfers the business or part of it into a newly formed subsidiary and then sells the shares in that subsidiary. The buyer acquires a clean company holding only the chosen assets and liabilities, while completing the deal as a share purchase. Consents are still needed for the hive-down, TUPE will usually apply to it, and tax reliefs available on the intra-group transfer may be clawed back if the subsidiary leaves the group too soon.
06Can a buyer avoid all liabilities in an asset deal?
Not entirely. Employment liabilities transfer with employees under TUPE, some environmental liabilities attach to land whoever owns it, and the buyer takes on future obligations under contracts it assumes. A buyer should still carry out due diligence, define excluded liabilities clearly in the asset purchase agreement, and obtain indemnities from the seller for pre-completion matters, ideally supported by retention or escrow where the seller's covenant is weak.
Sources and official materials
- Tax when you buy shares — HMRC guidance on Stamp Duty and SDRT on shares
- Stamp Duty Land Tax — HMRC overview of SDLT on land and property
- Transfer a business as a going concern (VAT Notice 700/9) — VAT treatment of business transfers
- Transfer of Undertakings (Protection of Employment) Regulations 2006 — Statutory text of TUPE
- Business transfers, takeovers and TUPE — Government guidance on employee protection on transfers
- Employment Rights Act 2025 — 2025 employment reforms being commenced in stages
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.