Sale Of Business As A Going Concern Agreement Template for England and Wales

When you're buying or selling a business that will continue operating under new ownership, you need a sale of business as a going concern agreement to ensure the transfer is legally sound and commercially viable. This document differs from an asset purchase agreement because it transfers the business as a functioning entity, preserving its operational capacity, customer relationships, and market position. It sets out the terms both buyer and seller sign up to, from the assets included to the support the seller provides after completion.

What is a sale of business as a going concern?

A going concern sale transfers a business that is trading and expected to keep trading, rather than a business being wound down or sold for parts. The buyer takes on the assets, contracts, employees, goodwill and, where they apply, regulatory licences that allow the business to carry on without a break. Because the business continues, the agreement focuses on continuity: keeping suppliers and customers in place, novating or assigning key contracts, and handing over the day-to-day knowledge the buyer needs to run it.

When do you need this document?

You'll need this agreement when acquiring or disposing of an established business that the buyer intends to continue operating without significant interruption. This includes retail stores, professional practices, manufacturing operations, service businesses, or franchise operations where maintaining continuity preserves value. The agreement is particularly important when the business has existing contracts, employees, or regulatory licences that must transfer. You'll also need it when the sale includes intangible assets like goodwill, customer lists, or trade names that contribute significantly to the business value.

What does the buyer and seller each agree to?

The seller agrees to transfer the identified assets with good title, to give warranties about the state of the business, and often to help the buyer take over smoothly through a handover period and introductions to key customers and suppliers. The seller usually accepts restrictive covenants that limit competing with the business for an agreed term. The buyer agrees to pay the purchase price, to take on the transferring employees and assumed liabilities, and to comply with the conditions attached to any consents. Setting out these obligations clearly is what lets both sides complete with confidence.

How is debt handled in a going concern sale?

Read the agreement closely for how it treats existing debt, because who carries it changes the real value of the deal. In most going concern sales the buyer takes the business free of the seller's borrowings, with any trade debtors and creditors settled at completion or split by an agreed cut-off date. The agreement should state whether specific liabilities transfer to the buyer or stay with the seller, and require the seller to clear any charges or security over the assets before completion so title passes clean.

What is typically included and excluded?

A going concern sale commonly transfers the following.

• Tangible assets: stock, equipment, fixtures and fittings.
• Contracts: customer and supplier agreements, subject to any consent needed to assign or novate them.
• Employees: staff who transfer automatically under TUPE.
• Intellectual property: trade marks, designs, domain names and business names.
• Goodwill: customer relationships, reputation and trading history.
• Records: customer lists and operational information the buyer needs to run the business.

The agreement should also list what is excluded, such as cash at completion, certain personal assets, outstanding debt kept by the seller, or contracts the parties agree to leave behind, so there is no dispute about what the price covers.

Key legal considerations

Several elements need careful attention. Asset identification and valuation clauses must specify what's included and excluded, including stock, equipment, intellectual property, and goodwill. Employee transfer provisions must comply with the TUPE Regulations 2006, covering the consultation process and protection of employment terms. Warranties and indemnities protect the buyer against undisclosed liabilities, while restrictive covenants limit the seller competing after completion. Due diligence should be thorough, covering financial records, regulatory compliance, existing debt, and material contracts. A property and company search at completion confirms there are no undisclosed charges, and escrow arrangements can hold back part of the price for disputed items while detailed completion mechanics let control pass cleanly.

How is VAT treated on a going concern sale?

Where the sale qualifies as a transfer of a going concern under the Value Added Tax Act 1994, it can be treated as neither a supply of goods nor services, so no VAT is charged on the sale. The conditions are strict: the buyer must use the assets to carry on the same kind of business, be or become VAT registered, and there must be no significant break in trading. The agreement should record the parties' intention on VAT treatment and provide for what happens if HMRC later decides the relief does not apply.

What related documents might you need?

A going concern sale often sits alongside other paperwork. If the business trades from leased premises, you may need to assign or grant a lease, so a lease agreement can form part of the deal. Employment, confidentiality and consent letters for assigning contracts commonly follow the main agreement.

Legal requirements in England and Wales

Your agreement must comply with several statutory frameworks. Under the Sale of Goods Act 1979, you must ensure proper transfer of title and compliance with implied warranties regarding business assets. The Companies Act 2006 applies if transferring corporate entities, requiring adherence to registration and disclosure obligations. The TUPE Regulations 2006 mandate specific procedures for employee transfers, including consultation and automatic transfer of employment contracts. VAT considerations under the Value Added Tax Act 1994 may apply, particularly the going concern provisions that can remove VAT from the sale. Employment Rights Act 1996 protections must be preserved during the transfer. Depending on the sector, you may also need regulatory approvals, such as licensing transfers or competition law clearances for larger transactions.