Key takeaway

Exiting a SME business involves a structured preparation phase, followed by detailed legal and financial due diligence through to completion of the transaction. Early preparation helps to preserve value, particularly where sellers present complete and consistent records, address potential purchaser risks and reduce the scope for price adjustment later in the process.

In this article, we discuss how to prepare your business for sale in 2026.

Preparing a UK SME business for sale in 2026: what will a buyer ask for first?

Details of core commercial contracts, corporate accounts, statutory registers, tax filings, employment obligations and key assets are frequently requested at the outset. The level of verification required to validate disclosure documentation continues to increase, with any gaps or inconsistencies likely to be analysed and priced.

Business registration details, sector-specific licences and permissions and compliance with local authority requirements will be checked against actual trading activity. In regulated sectors such as financial services, healthcare and education, the absence of a required licence or an unnotified change in control can halt a transaction entirely. Even in less regulated sectors, inconsistencies between trading names, registered details and branding can prompt additional scrutiny.

Business Legal Check-Up services are a helpful first step to confirm the business is operating in line with industry standards and compliance requirements.

Recent disputes show how quickly risks can crystallise where information is ambiguous or incomplete. In Veranova Bidco LP v Johnson Matthey plc [2025] EWHC 707 (Comm), the High Court refused to strike out a misrepresentation claim linked to statements in a draft disclosure letter exchanged during negotiations, underlining the potential for disclosure materials to be evidentially significant beyond their intended function.

Which commercial contracts create change of control risk?

Most value erosion in SME sales arises from contract risk not considered from the outset of discussions and the commercial impact can be significant. Change of control clauses which give a counterparty the right to terminate or renegotiate following a sale are important to be aware of.

A contract representing a modest percentage of turnover may be of unexpected significance to a purchaser. For example, if a key supplier can terminate on completion, the buyer may seek a price reduction or defer completion until consent is secured.

As buyers will examine termination rights, renewal provisions, pricing mechanisms and restrictions on assignment, it is helpful to have a register of live contracts and key terms, as well as potentially problematic or onerous provisions.

What financial and compliance evidence will a buyer rely on when pricing a UK SME in 2026?

Buyers will review audited accounts, management accounts and tax records to assess sustainability of earnings and working capital requirements. Up-to-date corporation tax filings, PAYE compliance and VAT records are routinely examined, requiring reconciliation of filed accounts and internal reporting.

Directors should remain mindful of their duties under the Companies Act 2006 when considering offers and managing disclosure. Material changes in trading or newly identified liabilities between heads of terms and completion should be addressed promptly. Read more in our article on protecting the owner’s interests during an M&A transaction.

Companies House compliance has also moved up the agenda. The Economic Crime and Corporate Transparency Act 2023 has introduced tighter identity verification and filing requirements, and buyers now routinely check that filings are current and consistent with internal records. Ensure to update and maintain accurate statutory registers, including the register of people with significant control. Read more on PSC obligations for a useful benchmark for what purchasers expect to see in practice.

What employee transfer risks must be identified?

Transaction structure matters for a myriad of reasons, including in the treatment of employees. Therefore, early identification of employee associated obligations and risks is essential. These may include misclassified contractors, informal bonus arrangements, enhanced redundancy terms or unresolved grievances.

In an asset sale, the Transfer of Undertakings (Protection of Employment) Regulations 2006 will usually apply, resulting in the automatic transfer of employees assigned to the business. A buyer will therefore require accurate employee liability information, including roles, remuneration, benefits, length of service and any ongoing disputes.

In a share sale, where TUPE does not apply, buyers will analyse exposure to claims and compliance with statutory obligations such as holiday pay and pension auto-enrolment.

How does IP ownership affect a UK business sale process?

For many SMEs, goodwill is reflected in brand assets, software, databases and proprietary materials. Buyers will want to understand whether the company owns those rights and can transfer them without third-party claims. Historic gaps, particularly where founders or consultants created key assets without formal assignment, remain common.

If ownership is unclear, remedial assignments are typically required before completion. Addressing these issues in advance prevents avoidable delays and reduces the likelihood of additional warranty protection being demanded.

Evaluating the shareholding structure and resolving disputes before sale

Another critical step is reviewing the company’s shareholding structure. Buyers will examine the articles of association, shareholders’ agreements, option schemes and any historic share issuances. Inconsistent cap tables, undocumented transfers or informal side arrangements can complicate completion mechanics and should be discussed with a legal adviser.

Any existing or threatened shareholder disputes should be resolved before a sale process gathers pace. Even minority disagreements over valuation, drag and tag rights, or dividend policy can undermine deal certainty. The High Court’s recent approach in Learning Curve (NE) Group Ltd v Lewis [2025] EWHC 2491 (Comm), which considered the operation of warranty and indemnity provisions in a share purchase dispute, illustrates how post-completion disagreements can escalate when structural issues are not addressed early.

Preparation for sale involves testing whether the company’s legal, financial and corporate framework will withstand external scrutiny, and our team can help with the items discussed in this article.

Our M&A lawyers are highly experienced in selling UK businesses – from reviewing contracts, pre-sale checks and executing the deal to help you get the most value out of your business, including in distressed M&A transactions.

Please contact the Corporate Law team at Barnes Law for advice on preparing a business for sale.

Authored by Barnes Law Managing Partner, Yulia Barnes.