business Archives - Elysium Law

Buying a Business in the UK: A Practical Guide to M&A Under £5million

Posted on 26 Jan 202628 Jan 2026 by David Brogelli

Buying a business can be one of the quickest ways to grow, whether you’re acquiring a competitor, expanding into a new market, or buying your first “ready-made” business rather than starting from scratch.

But even when the purchase price is ‘only’ a few hundred thousand pounds (or a few million), the legal and tax issues can be significant. The reality is that smaller acquisitions often carry more hidden risk, because the target business may be owner-managed, less formally documented, and reliant on a few key customers or suppliers.

This guide is written for business owners, would-be business owners and SME directors considering an acquisition under around £5m, where you want a professional, robust legal process, but you also need cost control and fee transparency.

At Elysium Law, we are a barrister-led boutique firm with a tech-enabled, pragmatic approach, designed to deliver cost effective advice with transparent and flexible fees.

The most common deal structure for SMEs: the share purchase

Most of the acquisitions we advise on in the SME space are share purchases.

In a share purchase, you buy the shares in the company that owns and runs the business. The company stays the same legal entity, which means:

the contracts often stay in place;
employees remain employed by the same company; and
the company’s assets and liabilities remain inside the company (and therefore become your responsibility as the new owner).

That last point is crucial: you’re not just buying the ‘good bits’. You are buying the company ‘warts and all’ unless you negotiate contractual protections.

That’s why the quality of the legal work in a share purchase is usually less about paperwork and more about:

identifying risk early (due diligence);
documenting what the seller is promising (warranties);
and allocating risk fairly (indemnities, price mechanisms, disclosure).

A simple overview of the acquisition process (under £5m)

Every transaction has its own shape, but most SME share purchases follow a familiar route.

1) Initial offer and heads of terms

Once price and key commercial points are broadly agreed, the parties often record the deal in Heads of Terms (also called Heads of Agreement or a Term Sheet).

Heads of Terms are usually ‘subject to contract’ (not legally binding on the main deal), but they are still important because they:

set expectations;
drive the timeline; and
prevent expensive misunderstandings later.

Cost-saving tip: A well-drafted Heads of Terms is one of the cheapest ways to avoid a costly negotiation spiral later on.

2) Confidentiality and exclusivity

Before sensitive documents are shared, you’ll usually sign an NDA (non-disclosure agreement).

Sellers often ask for exclusivity, i.e. you spend money on due diligence and lawyers while they agree not to negotiate with anyone else for a short period.

Important consideration: Exclusivity can be reasonable, but it should be:

time-limited;
tied to progress milestones; and
clear about what happens if the seller delays.

3) Due diligence (legal, financial and tax)

Due diligence is the investigation stage. In a share purchase, this is where you look for anything that could make the business worth less than you think, or that might create expensive problems after completion.

Typically:

your accountant covers financial due diligence;
tax specialists cover tax due diligence; and
we handle legal due diligence and coordinate the overall legal workstream.

We also work closely with highly experienced accountants and tax advisers to ensure the deal is structured sensibly from the outset (rather than trying to fix tax issues once the documents are drafted).

4) Drafting and negotiating the SPA (Share Purchase Agreement)

The Share Purchase Agreement (SPA) is the main contract. It sets out:

what’s being bought and sold;
the purchase price and how/when it’s paid;
conditions to completion;
warranties, indemnities and limitations; and
what happens if something goes wrong.

5) Completion and post-completion

On completion day:

money and shares change hands,
director/shareholder changes are implemented, and
filings are made (e.g., Companies House).

Post-completion tasks can be deceptively important – particularly if you’re changing banking arrangements, supplier accounts, insurances or key contracts.

What legal due diligence actually looks at (in plain English)

For acquisitions under £5m, legal due diligence is not about producing a glossy report that gathers dust.

It’s about asking what could hurt you after completion, and how do we either:

fix it before you buy; or
price it into the deal; or
protect you contractually.

Here are the areas we commonly focus on:

Key contracts: Are major customers/suppliers tied in? Are there change-of-control clauses that allow termination if you buy the company?
Employment: Are there key staff, restrictive covenants, grievances, or unpaid holiday liabilities?
Property: Is the premises owned or leased? Are there landlord consents needed for a change of control?
IP and brand: Does the company actually own its website, domain, software, trademarks, designs and content?
Data protection: Are there obvious compliance gaps (particularly with customer data and marketing lists)?
Disputes: Ongoing claims, threats, historic settlement agreements, regulatory complaints.
Corporate housekeeping: Are Companies House filings up to date? Are there missing board minutes, share issues, or unclear ownership?
Insurance: Are policies adequate and transferable?
Tax flags: Share purchases often involve hidden tax risk, which is why coordinated tax input matters early.

Cost-saving tip: A clean, organised data room from the seller can materially reduce fees. Conversely, poorly organised information almost always means more time (and therefore more cost).

Warranties, disclosures and indemnities: the ‘protection layer’ in a share purchase

In a share purchase, you can’t physically separate liabilities from the company, so the SPA usually becomes your protection tool.

Warranties

Warranties are contractual promises from the seller about the company (e.g. contracts, litigation, tax compliance).

If a warranty turns out to be untrue, you may have a claim, but only if:

it’s drafted properly;
it’s not ‘disclosed against’; and
the contract doesn’t limit your remedies too heavily.

Disclosures

Sellers disclose known issues (e.g. “there is a dispute with Customer X”). A properly managed disclosure process is a core part of risk allocation.

Indemnities

Indemnities are usually used for known, specific risks (e.g. a tax investigation, a threatened claim, or a contaminated lease issue). They can offer more direct protection than warranties.

Timelines: how long does an SME acquisition take?

As a broad rule of thumb, many share purchases under £5m complete within 4–12 weeks once heads of terms are agreed – but it can be faster or slower depending on:

the seller’s readiness and document organisation;
whether there is property involved;
how quickly due diligence questions are answered;
the complexity of the SPA negotiations; and
funding arrangements and lender requirements.

If speed matters, we can structure the deal plan around priorities and milestones, so you’re not paying for unnecessary drafting before the main risks are understood.

The cost question: how much should legal support cost for a share purchase under £5m?

Cost is a completely reasonable concern and, for many buyers, the legal spend is one of the few controllable variables in the transaction.

Our approach: fixed fees, scoped to your deal

We offer fixed fees, calculated based on the size and complexity of the transaction, and agreed in advance.

Fixed fees start from £7,500 + VAT for a very simple share purchase.
Regulated businesses (and deals with heavy property/employment complexity) generally require more work and therefore higher fees.

We are able to remain competitive because our model is built around:

efficient, tech-enabled working practices;
a scalable team approach; and
transparent, flexible fees.

What drives cost up (so you can plan for it)

The biggest cost drivers on SME acquisitions are typically:

multiple shareholders/sellers (more negotiation, more signing logistics);
incomplete company records;
property (leases, consents, title issues);
complex customer contracts or change-of-control issues;
deferred consideration/earn-outs/vendor finance; and
regulated sectors (where approvals or compliance steps can be significant).

A quick real-world example

We regularly advise SMEs and owner-managed businesses on acquisitions.

A typical example is acting for a recruitment business carrying out a series of acquisitions of rivals to expand its market reach. In those cases, the legal work needs to be:

repeatable (so every acquisition doesn’t reinvent the wheel);
risk-focused (so the buyer doesn’t accumulate hidden liabilities); and
cost-controlled (so legal fees don’t erode deal value).

That’s exactly the kind of pragmatic, commercially-minded approach we aim to bring.

Why instruct Elysium Law for an SME acquisition?

For many acquisitions under £5m, you don’t need a large City team with a long list of chargeable timekeepers.

What you need is:

an adviser who understands deal mechanics;
who can run a disciplined process;
who knows where SME deals usually go wrong; and
who keeps fees proportionate to the value of the transaction.

Elysium Law was built to provide high quality, cost effective and strategic advice, with a model designed to cut unnecessary friction and expense.

Clients frequently highlight clear explanation and cost transparency in their feedback to us.

Next step: a free, no-obligation call

If you’re considering buying a UK business – whether you’re a first-time buyer or building a buy-and-build strategy, we’re happy to have a free, no-obligation call to discuss the deal, likely risks, and how we would price the work.

You can contact us on 0151 328 1968 or email clerks@elysium-law.com.

Unfair Prejudice Petitions under Section 994 of the Companies Act

Posted on 20 Jan 202620 Jan 2026 by Ruby Keeler-Williams

Unfair prejudice petitions under section 994 of the Companies Act 2006 remain a significant tool in shareholder disputes. They are also among the most commonly misunderstood.

While the jurisdiction is deliberately flexible, the courts have consistently made clear that it is not a remedy for every commercial disagreement or breakdown in working relationships.

Many petitions arise in closely held companies where trust has eroded and communication has failed. In those circumstances, it is often assumed that the court will intervene to impose a fair outcome, but that is not the case. The focus of the court is not on whether a situation feels unfair, but on whether the conduct complained of departs from the basis on which the shareholders agreed to associate.

This article explains how the courts approach unfair prejudice petitions in practice, with particular reference to 50:50 companies, quasi-partnerships, deadlock and breakdown of trust. It also considers the continuing influence of the House of Lords’ decision in O’Neill v Phillips [1999] 1 WLR 1092 and the strategic importance of buy-out offers in relation to the outcome of the dispute and potential costs exposure.

The statutory framework and the meaning of unfairness

Section 994 allows a shareholder to petition where the company’s affairs are being conducted in a manner that is unfairly prejudicial to the interests of members.

Two elements must therefore be established:

There must be prejudice to the petitioner’s interests as a shareholder; and
That prejudice must be unfair.

The concept of unfairness is not assessed by reference to abstract notions of morality or reasonableness. The court is concerned with whether the conduct complained of breaches the legal or equitable basis on which the shareholders agreed to operate the company. That may arise from the articles, a shareholders’ agreement or from understandings that formed part of the foundation of the relationship.

The jurisdiction is therefore fact sensitive, but it is not open ended. The courts have repeatedly emphasised that section 994 is not a mechanism for correcting every commercial disappointment or personality clash.

The continuing importance of O’Neill v Phillips

The modern approach to unfair prejudice is anchored in the decision of the House of Lords in O’Neill v Phillips [1999] 1 WLR 1092. The judgment remains central because it imposed discipline on a jurisdiction that had, at times, been treated as an invitation to litigate commercial grievances under the banner of equity.

Lord Hoffmann made clear that unfairness will usually require either:

a breach of the company’s constitution or shareholders’ agreement; or
the frustration of a legitimate expectation arising from an understanding or promise on which the petitioner relied.

A mere breakdown in relations, even if severe, is not enough.

Lord Hoffmann also emphasised that the court is not there to resolve all commercial fall-outs or to redistribute risk retrospectively when a business relationship ceases to work.

Quasi-partnerships and legitimate expectations

Despite the constraints imposed by O’Neill, the courts continue to recognise that some companies operate, in substance, as quasi-partnerships, despite being incorporated.

In small, owner-managed businesses, it is not uncommon for personal relationships and informal understandings to sit alongside formal documentation.

Where a company has the hallmarks of a quasi-partnership, the court may look beyond the strict legal rights set out in the articles. Exclusion from management, removal from decision-making or conduct that undermines an agreed basis of participation may amount to unfair prejudice, even if technically permitted by the company’s articles (Re Guidezone Ltd [2000] 2 BCLC 321).

That said, the existence of a quasi-partnership is not assumed, rather it must be established by reference to evidence, including the history of the relationship and the role each shareholder was intended to play. Not every small company will meet that threshold.

Deadlock and breakdown of trust

Deadlock is a common feature of unfair prejudice petitions, particularly in companies with equal shareholdings. However, deadlock alone does not justify relief.

The courts distinguish between:

Neutral deadlock, where parties simply cannot agree; and
Unfair deadlock caused or exacerbated by one party’s oppressive or obstructive conduct.

Where parties are simply unable to agree, the court will not intervene merely because the company is no longer functioning smoothly. By contrast, where one party’s conduct has undermined mutual confidence or deliberately obstructed the company’s affairs, the analysis may be different.

In Re A Company (No 004475 of 1982), the court held that where a relationship of mutual confidence has broken down due to one party’s conduct, relief may be justified even in the absence of technical wrongdoing.

Even in those cases, the petitioner must demonstrate that the conduct crosses the threshold of unfairness. Incompatible personalities or poor communication will rarely suffice alone.

Conduct capable of amounting to unfair prejudice

In practice, successful petitions tend to involve clear departures from the agreed basis of the relationship.

Common examples include:

Exclusion from management contrary to an understanding;
Abuse of majority voting power;
Attempts to force a shareholder to sell at an undervalue;
Diversion of business opportunities;
Withholding financial information; and
Manipulation of remuneration or dividends.

Conduct or behaviour that is merely abrasive, uncooperative or discourteous is unlikely to found a claim unless it forms part of a wider pattern of inequitable conduct. The court is concerned with substance rather than tone.

Remedies and valuation

Where unfair prejudice is established, the court has wide discretion as to remedy. The most common outcome is an order requiring one shareholder to purchase the other’s shares.

In quasi-partnership cases, shares are usually valued on a pro rata basis, without a minority discount and on a going concern basis. The valuation date is typically the date of the order, although the court retains discretion where fairness requires a different approach.

Valuation issues are often as contentious as liability and early consideration of valuation principles can materially influence litigation strategy.

The strategic importance of buy-out offers

A key practical lesson from O’Neill v Phillips is the significance of a properly framed buy-out offer.

An offer is likely to undermine a petition if it:

Is made in good faith;
Reflects a fair value;
Applies orthodox valuation principles; and
Does not seek to exploit the petitioner’s minority position.

Where such an offer is refused unreasonably, the court may view the continuation of proceedings as oppressive or abusive. That can have serious costs consequences, even if some elements of unfairness are established.

From a strategic perspective, early consideration of exit options and valuation can often provide a more controlled and proportionate route to resolution than prolonged litigation.

When to seek advice

Early advice is particularly important in potential unfair prejudice claims. Decisions taken at an early stage can affect costs exposure and the remedies ultimately available. Elysium Law advises both Petitioners and Respondents at this stage, helping to assess risk and determine the most appropriate course before positions become entrenched.

Shareholders should consider seeking legal advice where there is evidence of:

exclusion from management;
misuse of control; or
conduct that appears inconsistent with the basis on which the company was formed.

We can advise on whether those concerns are capable of meeting the statutory threshold under section 994 and how the court is likely to approach them in practice.

Equally, those facing a petition should seek advice promptly to assess the strength of the claim and whether strategic steps, including a properly framed buy-out offer, may limit risk and costs.

Unfair prejudice litigation can be complex, fact-sensitive and potentially expensive. Our role is to provide early, specialist advice that allows parties to assess whether proceedings are justified, how the case is likely to be viewed by the court and whether a negotiated exit or alternative dispute resolution may offer a more proportionate outcome.

Conclusion

Unfair prejudice remains a powerful remedy, but petitioners should be aware that the courts have consistently resisted attempts to use section 994 as a substitute for commercial negotiation or as a forum for airing general grievances.

Successful petitions tend to involve a clear quasi-partnership context, identifiable understandings about participation or reward and conduct that goes beyond friction into the territory of inequitable abuse.

If you are involved in a shareholder dispute and are concerned about whether conduct within the company may amount to unfair prejudice, or if you are facing a petition and wish to understand your position, we can advise.

Elysium Law provides specialist advice on unfair prejudice petitions, including early assessment of merits, strategic options, costs exposure and exit routes.

If you would like to discuss your circumstances in confidence, please contact us to arrange an initial consultation.