What is Share Sale?
Short answer: A share sale is the acquisition of shares in the legal entity that operates the business, rather than a transfer of selected assets out of that entity. The shareholders change, but the company normally remains the same contracting party, employer, taxpayer and owner of its property.
That continuity distinguishes a share sale from an asset sale. It may reduce the number of individual transfers needed, but it also means the buyer generally acquires the company with its known and unknown historical exposures. Buyers therefore examine corporate authority, ownership of the shares, financial statements, taxes, contracts, employment matters, litigation, compliance, data, intellectual property and contingent liabilities. Sellers focus on the equity proceeds, warranties, indemnities, liability caps, escrow or holdback arrangements and the release of personal guarantees. A change of control can still trigger consent, termination, notification or repayment rights even though the contracting entity does not change.
How it works
The parties first confirm the shares and rights being sold, including options, convertibles and minority interests. They agree whether value is expressed as enterprise value or equity value and how cash, debt and working capital affect the amount paid. The share purchase agreement then sets consideration, conditions precedent, interim operating covenants, warranties, indemnities, limitations, completion deliverables and post-completion obligations. The buyer verifies title and required board, shareholder, lender, regulatory and third-party approvals. At completion, transfer instruments, funds, resignations, releases and corporate records are exchanged. A common mistake is to assume that every contract continues automatically. Another is to treat a clean balance sheet as proof that there are no off-balance-sheet, tax or conduct exposures.
Illustrative bridge: equity value = enterprise value - defined debt and debt-like items + eligible cash +/- working capital and other agreed adjustments
Example
A buyer agrees enterprise value of 100 for all shares in an operating company. The agreement defines 18 of borrowings, 3 of eligible cash and a working-capital shortfall of 2. The illustrative equity value is 100 - 18 + 3 - 2 = 83. The company keeps its customer agreements and employees, but one facility agreement requires lender consent on a change of control and a major customer may terminate after such a change. The seller must therefore obtain or condition completion on the relevant consents. If an undisclosed tax assessment later relates to a pre-completion period, responsibility depends on the tax covenant, warranties, indemnities and applicable law, not merely on the fact that the transaction was a share sale.
Why it matters
Owners use the structure to compare likely net proceeds, execution steps and continuing exposure after completion. Buyers and private-investment teams use it to decide how much historical risk they can accept, what protections they require and whether the company can support acquisition financing. Boards must evaluate value, certainty, stakeholder effects and conflicts, while management must preserve operations through signing and completion. A share sale can support continuity, but it should be chosen only after comparing the legal, tax, accounting and commercial results with credible alternatives.
The exact result depends on company law, tax law, securities rules, merger control, foreign-investment screening, sector licences, employee consultation and the governing documents. Public-company takeovers can follow mandatory timetables and disclosure regimes that are very different from a private sale. Accounting may treat the buyer's transaction as a business combination even though the legal form is a share purchase. Local counsel, tax advisers and accountants must determine the actual transfer, consent, filing and recognition consequences.