Sale of shares in limited company
A sale of shares does not mean that the actual limited company is terminated, but rather is a matter between the seller and buyer. It is accordingly not something that shall be decided by the General Meeting of Shareholders or the Board of Directors. But the seller and buyer must take due consideration to the provisions in the Articles of Association and in a potential shareholder agreements. Do not sell to somebody you cannot rely on!
1. Determine the purpose of the sale
It is best to first have thought through the purpose of the sale.
Some basic questions
- Will the business be continued or closed?
- Are there multiple shareholders?
- Do they agree on what will take place?
- Are there any alternatives to a sale? Common alternatives are voluntary liquidation and a transfer of assets and liabilities or (in the event of insolvency) bankruptcy. Even mergers and demergers can be considered, but are less common.
Questions for the continued work
When you have the answers to the first questions, continue by considering the following:
- Will all of the shares be sold, or perhaps just some?
- Will the company name accompany the shares or be changed?
- Does the limited company own anything that is especially registered, such as vehicles, properties, tenant owner premises?
- How about rental agreements and leases? Will they be terminated? Can they be taken over?
- Will a buyer take over the entire limited company with all of its assets and liabilities? Or will all or just some of the assets be sold instead (a so-called transfer of assets and liabilities)?
- Will all or part of the Board of Directors and others be replaced?
- Is it suitable for the existing Board of Directors to prepare a sale or closure of the business by, for example, paying debts and selling assets?
2. Check the tax rules
Check how the current tax rules will affect the limited company, the seller and the buyer.
3. Possibly obtain an adviser for the sale
There is quite a lot to think about. So it may be a good idea to get an adviser who can help you with your questions about the sale. You can get help with the sale from, for example:
- business brokers
- accounting consultants
Do not use templates from the Internet or books without checking that they are up-to-date and match your circumstances.
4. Find a buyer
Only sell to somebody you can trust, who pays and does what they promise to do!
Are there buyers?
It is probably difficult to find a buyer if the limited company has not fulfilled its obligations, such as:
- having its accounts in good order
- having filed tax returns and paid taxes and social security contributions
- having sent in annual reports to the Swedish Companies Registration Office for every financial year – including years when the company was “dormant”.
It is not completely inconceivable that it is possible to sell a limited company that has operated at a loss. It depends on the buyer’s interest in what is in the company.
A buyer probably wants to check if the company has debts at the Swedish Enforcement Authority or unpaid taxes at the Swedish Tax Agency, or business mortgages at the Swedish Companies Registration Office.
Is the equity less than half of the registered share capital?
If the Board of Directors suspects that the equity is less than half of the registered share capital, it must ensure that the rules on a balance sheet for liquidation purposes are followed. If one cannot resolve the financial situation, the limited company must resolve to enter liquidation. If the Board has not conducted itself according to these rules, there is also a risk that the Board, among others, will incur personal liability for the debts. There are particularly stringent rules regarding the responsibility for taxes and social security contributions, so-called representative liability External link..
To reduce the risk of personal liability, the party buying a limited company that does not retain coverage for enough of the share capital needs to be prepared to resolve the issue, for example by infusing new capital.
5. Prepare the share register
The seller needs access to the limited company’s share register and share certificates.
Ensure that the share register is updated and matches the share certificates. There must always be a share register. It is the Board of Directors that shall take care of it. If there is no share register, it must be reconstructed.
Any share certificates
For many years, share certificates have not been required to be issued unless a shareholder requested one. This means that shareholdings are primarily visible in the share register. If a share certificate has not been issued, it is advisable for there to be a note about this in the share register.
6. Check the Articles of Association
Both the Articles of Association and a potential shareholder agreement can include provisions that govern how a sale of the company may take place.
Articles of Association
The Articles of Association may include provisions that limit the possibilities for shares to be transferred from the existing shareholders to another party by sale or otherwise. The only permitted ways to make such restrictions in the Articles of Association are pre-emption, the right of first refusal and consent.
Both the seller and the buyer should check the registered Articles of Association.
Potential shareholder agreement
If there is also a shareholder agreement between the existing shareholders, there may be additional matters there to take into consideration. It may involve even greater restrictions and obligations than the Articles of Association may contain. It is not uncommon for such agreements to entail an obligation to pay large amounts of money to the other parties to the agreement in the event of breach of the agreement.
7. Write a purchase agreement
The buyer and seller often sign a separate purchase agreement. Even if the parties were to feel that they do not need a detailed agreement, they should at least make contract notes (see below).
Content of the purchase agreement
A purchase agreement should include provisions regarding:
- the price of the shares
- the transfer date
- the right to use the company name
- any obligation for the buyer to ensure that
- a General Meeting of Shareholders is held
- the Board of Directors, the auditor and the registered company name, etc. are changed with the Swedish Companies Registration Office and others unless this was done in advance through actions after a General Meeting of Shareholders that was arranged by the seller
- what will occur in the event of a breach of contract, any additional purchase consideration or price reduction, or damages or that the transaction shall be reversed
- other obligations that the parties shall have.
There is not normally reason to submit a purchase agreement or contract notes to the Swedish Companies Registration Office.
8. Take payment for the shares
The buyer pays for the shares and the seller hands over share certificates with a signed transfer.
Prepare and save a contract note
Both the seller and buyer should receive, and save, a copy of a so-called contract note. This is a specially formatted receipt that contains which shares are concerned, the price for the shares and signatures of both the seller and buyer. Examples are available on the Internet. Anyone assisting with the transaction can probably also help with the contract notes.
Enter the new owner in the share register
The buyer confirms that the buyer bought the shares and presents the share certificates, with transfer signed by the seller, so that the buyer can be entered as the owner of the shares in the share register, which the Board of Directors is responsible for. The shares are then signed by the person that took care of the entry into the share register that the new shareholder has been entered in the share register.
If the share certificates are pledged
Should the share certificates be pledged, for example, with a bank, the debt with the bank must as a rule be paid first in order for the existing owner to be able to get the share certificates back (the security for the bank loan).
If a majority of the shares are sold
If all shares change owners, or if a new owner compared with before receives a majority of the votes, the most usual is that the limited company’s Board of Directors and postal address, etc., are to be changed directly with the Swedish Companies Registration Office. Ensure that this is done.
9. Register changes, etc.
It is common for a change of owner to entail changes to the Board of Directors, managing director, authorised signatories and the joint signature. Sometimes, the auditor shall also be changed.
Both the seller and buyer should ensure that the changes are really made and that inaccurate information does not remain and that the new information is properly registered.
Register the new address with the Swedish Companies Registration Office
Register the new address with the Swedish Companies Registration Office. This means that it is not enough to change the address with, for example, the Swedish Tax Agency or with Svensk Adressändring Aktiebolag. If we have an email address registered, consider whether it shall be deregistered, changed or accompany the purchase.
Make the other address changes that may be needed:
- with the Swedish Tax Agency
- with Svensk Adressändring Aktiebolag (especially if the limited company wants to buy postal forwarding or the holding of post).
- with whoever has the company’s digital mailbox, such as Kivra, Min myndighetspost, e-Boks or Digimail.
Hold a General Meeting of Shareholders
If changes are to be made, for example, with regard to the Board of Directors and auditor, etc., the new majority shareholder most often ensures that the Board of Directors convenes a General Meeting of Shareholders. If the new shareholder is entered in the share register, the shareholder shall now be entered in the voting list.
If the Board of Directors changes
If the Board of Directors changes, the Board holds a meeting to decide on the chairperson (if there is more than one Board member), on a potential managing director, on any special company signatories within or outside the Board and on how the limited company’s signature is to be sided.
If the company no longer meets the residency requirements
If after the changes the limited company no longer meets the residency requirements, it may need to apply for exemption from these requirements in order for us to be able to register the Board of Directors. In some cases, the Board of Directors also needs to appoint and ensure to register a special person authorised to receive service of process on behalf of the company.
If the beneficial owner changes
A sale may mean that the limited company must report a new beneficial owner to the Swedish Companies Registration Office.
10. Register the new ownership structure with the Swedish Tax Agency
The seller and buyer shall be able to file notice of the sale (for any capital gains taxation, etc.).
The seller’s sales revenue and thereby the buyer’s acquisition cost are based on the information in the contract note. Check the current tax rule with the Swedish Tax Agency.
For closely held companies
Read more in the Swedish Tax Agency’s information on closely held companies (in Swedish) External link.. (Check the definition that applies for what counts as a closely held company for tax purposes).