Buying a business: Completion & post completion

In order to help demystify the various stages of a typical private M&A transaction, here, we set out the key stages of completion and post-completion when buying a business.

Completion

Timing

At exchange, the parties to the transaction execute the formal documentation (including the sale and purchase agreement). Whereas completion is the point in time where the sale and purchase formally completes and subject to some limited exceptions, the legal title to the shares or business/assets pass from the seller to the buyer.

An M&A transaction is structured in one of the following ways:

Split exchange and completion – this is where the relevant sale and purchase contract is exchanged (signed) on a particular date and completion of the transaction will occur at a later date. The exchange of the contract creates a legally binding obligation to complete so long as the relevant terms and conditions in the sale and purchase contract are met. We usually see a split exchange and completion where there are conditions to completion of the transaction such as Financial Conduct Authority change of control approval or where the consent of the Completion & Markets Authority is required.

Simultaneous exchange and completion – this is where exchange and completion of the purchase of the shares or business/assets occur at the same time and there is no gap between exchange and completion.

At the outset of a transaction, the parties usually set a proposed completion date which all parties will work towards.

Board Approval

Where the buyer in a transaction is a company, its directors will need to hold a board meeting to approve the terms of the acquisition and the execution of the transaction documents before the acquisition agreement is signed. This is also the case where the seller in the transaction is also a company and in certain circumstances, a resolution of the shareholders of the seller may also be required.

The target company (and any of its subsidiaries) will also hold a board meeting at completion to approve, amongst other things, the transfer of the shares to the buyer along with other completion mechanics such as appointment/resignation of directors and change of bank mandates.

Documents

Various documents will need to be delivered by the seller to the buyer upon completion. The list of documents usually includes stock transfer forms, director resignation letters, PSC notice letters and lost share certificate indemnities.

Post Completion

Once the transaction has completed, it is essential that a buyer does not forget about the numerous post-completion tasks that will need to be carried out. We have listed some of the main post-completion tasks below:

Stamp Duty

If the transaction involves the sale and purchase of shares in a company, stamp duty may be payable in relation to the purchase. Stamp duty is currently paid at a rate of 0.5% of the consideration. However, no stamp duty is paid if the value of the consideration is £1,000 or less. The buyer must pay the stamp duty and send the stock transfer forms to HMRC within 30 days of completion.

If the transaction proceeds by way of an asset or business purchase, stamp duty land tax may be payable in relation to any property elements of the acquisition.

Statutory Registers

In a share purchase, it is essential that the statutory registers of the target company are updated following completion given that it is a legal requirement for the target company to maintain up to date statutory registers. Given that the register of members is the prima facie evidence of shareholding in a company, the buyer will want to make sure that it is entered as the legal owner of the shares in the target company following completion and the payment of stamp duty (if applicable).

Companies House filings

Again in the event of a share purchase, the buyer will need to ensure the required filings have been made with Companies House in respect of the target following completion. These filings are likely to include:

• The appointment of new directors
• The resignation of previous directors
• Updating the PSC register
• Change of registered office
• Change of the target company’s accounting reference date.

If you have any questions about the topics raised in this article, please get in touch.