I was interested to read the recent case of IX v IY  which considered the question...
Share Sale and purchase
There are a number of stages to a share sale and purchase transaction, all of which have importance. It is prudent to seek legal advice and assistance from an early stage so that a transaction progresses smoothly, in a timely manner and in accordance with the wishes of and terms agreed by both parties.
The first stage for the vast majority of share sales or purchases will be the negotiation of the basic terms of the transaction. Buyer and seller will often negotiate directly with each other, sometimes they will go through an agent. Once the parties have come to a basic agreement, it is prudent set out the terms in writing by using “Heads of Terms”. We assist clients with the drafting of Heads of Terms to ensure that those rights and obligations that are intended to be legally binding are and those which the parties do not intend to be binding, are not. The advantage of Heads of Terms is that they help to clarify exactly what the parties understand the basis of the deal to be. In addition, disagreements and issues can be identified and dealt with at any early stage.
The next stage is usually due diligence, which is the name given to the process by which the buyer of a company makes enquiries of the seller to discover more about the company being bought. The due diligence process is a constantly evolving one. Often, the sending of the first due diligence questionnaire and the receipt of the answers to it will raise more questions. Answers to questionnaires will usually be accompanied by sometimes large volumes of documents.
Part way though the due diligence process, the buyer’s lawyer will usually prepare the first draft of the Share Purchase Agreement. It is entirely normal for a SPA to go through several drafts before a final version is agreed. The reason for this is that the first version of the draft SPA often raises new issues even where the parties have entered into Heads of Terms and is usually drafted heavily in favour of the buyer.
The completion of the sale of the shares usually takes place at the offices of the buyer’s solicitors, usually immediately after signing the SPA. However, sometimes the SPA provides for a delayed completion to take place after a gap period, e.g. where the SPA is conditional upon certain matters taking place before completion can take place. All of the company’s records and documents will be handed over at completion, and the money will be paid, usually by telegraphic transfer between the respective parties’ solicitors.
It is important, whether you are buying or selling a company, that you choose legal advisers who are experienced and regularly deal with company sales and purchases. Our Commercial and Corporate Finance Team have experience in transactions ranging from small share sales/purchases to multi million pound transactions. If you would like to discuss your proposed sale or purchase with one of our team, please contact Tracey Dickens on 01206 217326.