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The right time to sell: planning for retirement as a business owner or shareholder

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Retirement is something that many look forward to.  For those who have invested years of hard work into a business to make it a success, it is a time to reap the rewards. 

One could be forgiven for wanting to expedite the whole process and book a plane ticket to warmer climes as soon as possible.  However, it is important to take the time to consider your options. Proactive planning is vital to ensuring that the transition is as smooth as possible and instructing professional advisors early on in the process will help to save costs in the long-term.

Decisions, decisions

There are so many factors influencing one’s decision to sell their business; the thought can be so daunting that it is easier to push the question down the road for another day.  Importantly, retirement does not necessitate that one sells up.  Finding the right buyer can be difficult.  If one is not in great need of the liquidity and there is no compelling reason to sell, optimism about the future growth of the business and its value may encourage an owner to hold-out.

Leaving your job

If you are an employee and/or director, you will also need to think about when and how you resign. Depending on the composition of the management team and how heavily you have been involved in the day-to-day functioning of the business, a buyer may request that you continue to work for the company for a period after the sale to assist with the transition.

Dealing with shareholdings

So, you have decided that selling is the right way to go.  Context will play a big role in dictating the most appropriate structure of the deal.  You may have a competitive offer for shares or assets from a third party, however the company’s articles or a shareholders’ agreement may provide for certain pre-emption rights.  If the company has sufficient distributable profits, it may be able to buyback your shares.  An existing shareholder or shareholders may wish to purchase shares from you.  Irrespective of the above, an experienced corporate solicitor will be able to guide you through your options, allowing you to make informed decisions and understand their implications.

Tax and financial planning

Taking advice from an accountant or tax advisor will also be important, as the desire for tax efficiency can play a big role in the timing and structure of a deal.  For example, one’s length of employment and time of resignation can both factor into the availability of entrepreneurs’ relief.  It would also be highly recommended to consult a financial advisor about how best to arrange your finances and how to get the most out of your sale proceeds.

If you would like to discuss how BakerLaw can help you, please feel free to contact Simon Porter, Head of BakerLaw’s Corporate & Commercial Department, by emailing or calling 01252 730 754.

This article is not a definitive statement of the law. It is designed as a free update on the law at the time of publishing. It is not a substitute for legal advice on specific facts and circumstances. BakerLaw LLP and/or the writer accepts no liability or responsibility for reliance on this article and recommends that you seek independent legal advice on your specific circumstances prior to taking any steps.