Incorporation of Existing Business

Many businesses start out being traded either as a sole trader or as a partnership. A partnership can occur whenever there are two or more people working together with a common commercial aim - this may or may not be recorded in a formal partnership deed.

 

It is sometimes the case that the owner of the business will wish to convert the mode of ownership to a limited company - this generally follows accountancy advice. It therefore follows that the business has to be transferred from the owner to the company. Being a transaction between the owners and a company which they will control it would generally not be considered necessary or economically sensible to have a full blown businesses sale agreement. It can be done in a more simplistic way.

Our template assumes that:

  • the business is owned by a sole trader or partnership
  • the business does not own any freehold or leasehold property (if the business does include a property then it may be that the owners of the business will choose to retain ownership of the property and grant the company a lease - click here for information about a lease - the original owners will then receive rental income from the company)
  • the purchasing company has been set up with view to acquiring the business
  • the owners of the business are directors of the company
  • the price to be paid by the purchasing company to the owners of the business will be satisfied by shares in the purchasing company being allotted to the sellers of the business

The pack that you download will contain the following:

  • form of business sale agreement
  • notice of extraordinary general meeting
  • minutes of meeting of the board of directors
  • minutes of an extraordinary general meeting (EGM)
  • companies form 88(2)

The procedure that you should adopt is:

  • convene a meeting of the board of directors of the purchaser company. The meeting will acknowledge the intention to acquire the business and  the sellers will disclose their interest in the transaction as directors of the purchaser. The meeting will then be adjourned so that the EGM can be held
  • the EGM will be held. This confirms the directors authority to allot shares
  • the meeting of the board is reconvened. The form of business sale agreement is produced to the meeting and approved. A resolution is passed to allot shares to the sellers pursuant to the authority conferred by the EGM
  • the sale agreement is then completed
  • the company books should be brought up to date by adding in details of the allotment of shares
  • a return of the allotment of shares should be made to companies house using form SH01, This is in our pack or can be downloaded for free from Companies House. The address of Companies House is Crown Way Cardiff CF14 3UZ or PO BOX 29019  21 Bloomsbury Street London WC1B 3XD. Alternatively the 88(2) can be filed electronically at Companies House for this service you need to register at Companies House at https://ewf.companieshouse.gov.uk/seclogin
  • the share certificates should be written out and given to the Seller

Please remember that all businesses are individual. Our template is necessarily quite general in nature. Whilst our template will provide you with a good starting point it is unlikely to be suitable for use exactly as it is downloaded - you will need to adapt it to suit your particular business and the features of that.

If you are selling an existing business then see our Business Sale Agreement page.

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The documents available on this site have been prepared for use in England & Wales. They may not be valid if used in other areas.