Can you sell half of your business and stay on? Yes, and it’s more common than people expect. The catch is that the half you keep is a different thing after completion from what it was the day before. You go from owning a company to co-owning one, and the document that governs your life from then on is the shareholders’ agreement rather than the sale agreement.
Most sellers I speak to focus on the price for the half they’re selling. That’s understandable (it’s the bit with a number on it) but the terms that decide whether the arrangement actually works are somewhere else: who gets to decide what, what happens to your job, and how and when you get paid for the rest of your shares. If you’re at the stage of agreeing terms with a buyer, I’ve written separately about what the heads of terms should cover on a 51% sale. This piece is about what life looks like afterwards.
Half isn’t one number
Whether the buyer takes 49%, 50% or 51% matters more than the two percentage points suggest.
An ordinary resolution of shareholders needs a simple majority (section 282 of the Companies Act 2006) and a special resolution needs 75% (section 283). So a buyer with 51% can pass ordinary resolutions without you, and that includes removing you as a director under section 168. A 50/50 split means neither of you can do much without the other, which is fine while you get on and a deadlock when you don’t. If you keep 49% you’ve kept a lot of the value and much less of the control.
The shareholders’ agreement can change most of that. The usual tool is a list of reserved matters, which are decisions the company can’t take without your consent whatever the shareholdings say: borrowing over a set amount, issuing new shares, selling the business, changing what it does, hiring and firing senior people, and so on. So the percentage sets the default position and the agreement adjusts it. A buyer taking a majority will want the list short; you’ll want it long; where it lands says a lot about how the next few years will feel. There’s more on the mechanics in my note on drafting a shareholders’ agreement.
On a majority stake sale I’m working on at the moment, the shareholders’ agreement is a separate piece of work with its own fee, and I’d say it’s at least as important to the sellers as the sale agreement. That surprises people until they think about which document they’ll still be living under in five years’ time.
Are you selling shares or letting someone invest?
People say “selling half” to mean two quite different things.
The first is you selling some of your existing shares to the buyer. The buyer pays you, you pay capital gains tax on the gain, and the company’s own finances don’t change. The second is the company issuing new shares to the buyer. The buyer pays the company, you receive nothing personally, and your existing shares become a smaller percentage of a bigger total. That second route is really investment rather than a sale, and it’s the right answer if the business needs the money more than you do.
Plenty of deals are a mix of the two. It’s worth being clear which one you’re negotiating before you get to heads of terms, because the documents, the tax and the conversation about price are all different. There’s more on how a sale of shares works on my share purchase agreements page.
On tax, if you qualify for Business Asset Disposal Relief the rate on qualifying gains is 18% for disposals from 6 April 2026, with a £1 million lifetime limit that covers both halves if you sell the rest later. The conditions, including holding at least 5% for the two years before the sale, need checking for each disposal. I’m not a tax adviser and this is exactly the sort of thing your accountant should look at before you agree a structure rather than after.
You still give warranties, even on half
A buyer of half the shares is still buying into a company it didn’t build, so it will still want warranties about the accounts, the contracts, the employees, the tax position and the rest. Selling half doesn’t make that list much shorter.
The awkward part is that you’re now warranting a business you’ll carry on running alongside the person who might claim against you. A warranty claim between two people who still have to sit in the same board meeting is unpleasant for everyone. That’s a reason to spend time on the disclosure letter and the limitations on claims (the financial caps, the time limits and the thresholds), because the aim is to make sure a claim never needs to happen.
Your job changes, even if your desk doesn’t
If you’re staying on to run the business, you’ll almost certainly be asked to sign a new service agreement. It will set out your salary, what you’re responsible for, your notice period and, usually, restrictions on what you can do if you leave.
It’s also common for the shareholders’ agreement to include leaver provisions. These say that if you stop working in the business, you can be required to sell your remaining shares, and the price depends on whether you’re a “good leaver” or a “bad leaver”. Owners who’ve happily put leaver provisions on their own staff in the past are sometimes surprised to find the same clauses pointed at them. It’s a reasonable thing for a buyer to ask for (they’re paying partly for you to stay), but the definitions matter a great deal, particularly what counts as a bad leaver and how the price is worked out.
How do you get out of the other half?
This is the question I’d want answered before anything is signed, and it’s the one most often left vague.
A minority stake in a private company is hard to sell to anyone except the other shareholder. Without a mechanism, you could find yourself holding 49% of a business you no longer work in, with no dividend and nobody to sell to. The usual fixes are options. A put option lets you require the buyer to buy your remaining shares, often after a set period. A call option lets the buyer require you to sell. Either needs a price, which might be a fixed figure, a formula based on profits, or a valuation by an independent accountant.
Buyers are often reluctant to give a put option, and I can see why: it’s a promise to find money at a future date they don’t control. The compromises tend to be about timing and funding, such as an option that can only be exercised after a few years, or payment by instalments out of profits, which brings its own risks that I’ve written about in the context of deferred payments. Drag and tag rights are worth having too. Tag lets you sell your shares on the same terms if the buyer sells its stake to someone else; drag lets a majority force everyone to sell to a third-party buyer, which you’ll want to be sure is at a fair price.
As a minority shareholder you’ll also want an agreed dividend policy, regular management accounts and a seat on the board. A majority buyer may prefer to reinvest the profits and keep information on a need-to-know basis. That’s much easier to agree at the start than to argue about in year three, when the business has done well and one of you wants the money out.
What to do now
Work out what you actually want in three to five years’ time. If the answer is to be fully out by then, the exit mechanism for the second half is the most important term in the deal, and it should be in the heads of terms rather than left to “be agreed in the shareholders’ agreement”. Speak to your accountant about the tax on both disposals before you agree a structure. Check your existing articles and any existing shareholders’ agreement for pre-emption rights or consents that apply to a transfer. And have an honest conversation with yourself about working for a business you don’t control, because that’s what a sale of 51% means even if nobody puts it that way.
I help owners of small and medium-sized businesses sell all or part of their company, including the shareholders’ agreement that sits alongside a part sale. Get in touch if you’d like some help.
Written by Steven Mather, a business solicitor acting on company sales and purchases. This is general information about the law, not legal advice on your situation.
Written by Steven Mather, a business solicitor acting on company sales and purchases. This is general information about the law, not legal advice on your situation.
