Why would a company be sold for a nominal sum?

Usually because the owner wants out and the business carries obligations, such as leases, loans, staff or an ageing founder, that make it hard to sell at a conventional price. The buyer is taking on those obligations in exchange for an established customer base and trading history, so the legal protection matters more than the price.

What is the difference between a warranty and an indemnity?

A warranty is a statement that something is true; if it is false, the buyer must prove loss and the seller can argue it was disclosed. An indemnity is a promise to repay a specific loss pound for pound if it arises, with no need to prove the seller knew. For known risks, buyers should always ask for an indemnity.

Should the founder stay on after I buy the business?

Often yes, for a fixed period. Customers and staff trust the person they know, and a handover protects the goodwill you are paying for. Document it as a consultancy with defined days, deliverables and an end date, so you get the benefit of their knowledge without an open-ended commitment.

Buying a manufacturer for a nominal sum: indemnities

Buying an established electronics manufacturer for a nominal sum: how indemnities, not price, protected the buyer

A share purchase where the real negotiation was about the liabilities the buyer would inherit, not the money changing hands

By Malcolm Zoppi17 October 2026Industrial and manufacturing

Key facts

Deal type: Share purchase
Acting for: Buyer (newly formed SPV)
Business: Specialist electronics and sensor manufacturer, established for several decades
Sector: Industrial and manufacturing
Deal value: Nominal consideration
Structure: Share purchase from a corporate seller; part paid on completion, part deferred and reduced by any company debt
Timescale: Around two months from instruction to completion
Completed: September 2026
Lead solicitor: Malcolm Zoppi

At a glance

Our client, who was leaving employment to run his own business, acquired a long-established electronics manufacturer from its corporate owner for a nominal sum. The price was not the point: the company came with premises, staff, director loans and a lien in its articles, and the founder would stay on as a consultant. The work was in making sure the buyer took the business without taking its history.

The client and the objective

The buyer wanted a profitable, established business that he could run full-time, rather than building one from scratch. The target had a loyal customer base and a founder ready to step back. The objective was to complete quickly through a clean new company, keep the founder involved for a defined period, and ring-fence every known liability.

The deal

A new SPV incorporated for the purchase, with the buyer as sole director.
Share purchase of the entire issued share capital from a corporate seller, with the founder joining the agreement personally as covenantor.
Nominal consideration, split between a payment on completion and a deferred payment six months later, with the deferred amount reduced pound-for-pound by any company debt still outstanding.
A fixed-term, part-time consultancy for the founder to hand over customers and know-how.
The seller was represented by a boutique law firm.

Key legal issues and how we solved them

Pricing a company at a nominal sum

When the consideration is nominal, the usual tools of a buyer's solicitor, such as a retention or a price adjustment, are not available because there is nothing to retain. Protection has to come from the structure of the agreement instead. We split even the nominal price so that part was deferred, and gave the buyer the right to reduce it by any indebtedness, which kept the seller focused on clearing the company's debts before completion.

A targeted indemnity package

Due diligence identified five areas of exposure: employment claims from two named individuals, historic corporate compliance gaps, the company's occupation of its premises, director and member loans with the associated corporation tax consequences, and a lien over shares in the company's articles. Rather than rely on general warranties, we took a specific indemnity for each, so that any loss in those areas would be recovered in full without arguing about knowledge or disclosure.

Clearing the lien and the loans

The articles gave the company a lien over its shares for sums owed by shareholders, which could have complicated the transfer. The seller undertook to settle the relevant debts and release the lien before completion, with the indemnity standing behind that undertaking.

Keeping the founder without keeping the risk

The founder agreed to a part-time consultancy for a fixed period after completion. We documented it as a consultancy rather than employment, with clear deliverables and a staged reduction in days, so that the buyer had a handover without an open-ended obligation.

Outcome

The acquisition completed in September 2026. The buyer now runs the company full-time, the founder is working through the handover, and every identified liability sits with the seller under an indemnity.

What this deal shows

A nominal price does not mean low risk. It usually means the seller is handing over problems along with the business.
Indemnities for known issues are worth more than long warranty schedules, because they pay out without a dispute about what was disclosed.
Buying through a new company lets a first-time owner start with a clean corporate history.

“On this deal the price was almost irrelevant. What mattered was that every liability we found in due diligence had a named person standing behind it when we completed.”

Frequently asked questions