Buying or investing into a UK business

Investing into a UK private company

We are highly experienced in advising and representing non-UK business and investors who have found a UK business to buy or an attractive opportunity to invest in a UK business.

We look at how you can conduct due diligence on UK businesses from outside the UK and draw on our experience of working with businesses based all around the world looking to do business in the UK.

How to carry out due diligence on a UK business

The first step is to deal with heads of terms. From a practical perspective due diligence does not usually start until the heads of terms have been agreed – for more information on UK heads of terms.

There are no rules in the UK as to when you can start the UK due diligence or what information you can ask for and in what order.  We do set up data rooms to help co-ordinate the flow of information.

During the course of due diligence a great deal of potentially highly sensitive confidential information about the company and its business relations is exchanged. In order to cater for the interests of both sides, the parties generally enter into a non-disclosure agreement.

Due diligence questionnaires streamline the gathering and receiving of vital facts and data about a business, swiftly and effectively; whether that is concerning its financial stability, matters concerning employees, outstanding disputes, compliance issues or even cyber security. Due diligence questionnaires are used across all industries.  In the normal order of events once the initial due diligence has been considered the details of the sale purchase agreement is negotiated.

Key questions about the business

You will get more value out of a targeted report.  We tailor the questions to what you really need to know.  Common due diligence issues, depending on the kind of project, include :-

• What is the organisational structure?
• Are all Company filings up to date?
• Is the target business in a regulated industry? If so, does the business have all thye necessary permits and/or licences?
• Who are the key players? What are their roles and since when?
• A clear picture of the company's market, competitors, it's reputation, who the customers are and strength of relationships with suppliers?
• What are the operating costs and accounting policies?
• What if any debts are there?
• What existing financial agreements are in place?
• Are the employment contracts well drafted?
• How many employees are there and what is their length of service?
• What are the pension arrangements and other employee benefit plans?
• Are any specific permits, third party consents and licenses needed to operate the business lawfully?
• Is the business involved in any litigation or anything creating reputational risk?
• Does the business deal with consumers? If so, different laws and statutory protections apply.
• Is there any registered intellectual property e.g. trademarks and patents?
• What websites and domains does the company own?
• Does the company own any properties or land?
• What plant and machinery does the business own?
• Does the business own or have any leases or licences on property, land or equipment?

Data Protection

Particular care is needed around framing the enquiries relating to data protection.  Post Brexit the UK has its own GDPR regime which is not identical to the rest of Europe.  If there is a data breach the UK authorities can go back many years after the foreign investor or purchaser has acquired a UK business and long after the indemnities have expired.  Foreign investors and purchasers have been caught out and forced to pay very large fines.  More details are set out here.

Public corporate records

There are public records in the UK available to foreign investors and foreign companies accessible to all for checking out the UK business and its directors.  For example:

• Credit checks
• Company, partnership and director check
• Internet based checks

Tax aspects of buying a UK registered business

We work with non-UK based investors and parent companies acquiring UK companies who ask us to help them comply with the UK rules around registering ownership of the business acquired.

The transfer of shares to buyers will often be subject to stamp duty. To establish legal ownership of shares and assets you do need to have paid your tax to HM Revenue and Customs.  Stamp duty is assessed on the consideration payable as shown on the stock transfer form.  Consideration includes deferred consideration.  We make sure your HMRC reporting in correct.

There are other matters that will need attending to after acquisition of a UK business by foreign investors and parent companies.  For example, the appointment of new directors have to be registered at Companies House.  Often the articles of association change along with a host of other matters.  This is all quite complex for people operating outside the UK. We demystify the tangles.

Please do call us to talk over your requirements or concerns. We can help guide you through the process and provide tailored solutions.