Buying a property-holding company: cash-free debt-free share purchase with a limited-scope due diligence

At a glance

Our client, a family-owned trading business, is buying the company that owns two commercial properties in Telford from the landlord who has been running them. Rather than buy the buildings themselves, the client is buying the company, which keeps the properties, their arrangements and the target's membership of a retail buying group intact. The price, in the mid six figures, is payable in full on completion and funded by a commercial mortgage and the client's own savings.

The client and the objective

The client wants to grow its existing family business by taking on the two properties and the trade attached to them. Buying the shares rather than the assets was the quickest route, because it avoids re-papering the arrangements the properties already have in place, but it means the buyer inherits the company's history, which is where the legal work concentrated.

The deal

• Share purchase of the entire issued share capital on a cash-free, debt-free basis.
• Full payment on completion, funded by a commercial mortgage over the properties and cash savings, with the lender's solicitors taking security.
• Due diligence deliberately limited to two areas, corporate and property, with the legal protection in the share purchase agreement widened to compensate.
• A property solicitor instructed alongside us for the title and lease work.

Key legal issues and how we are solving them

Scoping the due diligence

A full due diligence exercise on a company of this size would have cost a disproportionate amount against the price. We agreed with the client to limit the investigation to the corporate records and the properties, and to rely on a broad warranty schedule for everything else. If something outside the investigated areas turns out to be wrong, the buyer has a claim against the seller rather than nothing.

Missing registers and share certificates

The company had not kept its statutory registers and there were no share certificates. That is common in owner-managed companies but it goes to the heart of a share purchase: the buyer needs to be sure it is buying all the shares from the person entitled to sell them. We reconstructed the position from Companies House filings, took specific indemnities in the share purchase agreement for any loss arising from the historic record-keeping, and dealt with the certificates as part of completion.

The buying group membership

The target belongs to a retail buying group, and much of the value of the trade depends on continuing to benefit from that membership. There is no regulator, but we reviewed the membership terms to confirm that a change of ownership would not end or suspend the membership, and built the position into the warranties.

Warranties as the main protection

With a narrower due diligence, the warranties do more of the work. The schedule covers accounts, tax, property, contracts, employees and compliance in detail, so that the buyer has recourse on anything it did not investigate directly.

Outcome

The share purchase agreement and funding are agreed and completion is scheduled for November 2026. This page will be updated once the deal has completed.

What this deal shows

• Due diligence can be scaled to the deal, but what you do not investigate has to be covered by warranties and indemnities instead.
• Poor record-keeping is not a reason to walk away from a small company; it is a reason to take an indemnity.
• When trade depends on a membership, licence or affiliation, confirm it survives a change of ownership before you agree the price.