On a share purchase the buyer inherits the target company complete with its history: every historic tax position, contingent liability, in-flight contract and litigation tail. Diligence scope is heavier on Schedules I, III, V and XII than on an asset purchase. The tax deed becomes the single most negotiated annex.
Direct answer
Share-purchase due diligence demands a full historic-liability sweep: corporate authority and PSC reconciliation under CA 2006, six years of corporation-tax computations, an HMRC enquiry trace, every assignable contract's change-of-control clause, litigation register and uninsured-exposure scoping for the tax deed and SPA warranty schedule.
Items emphasised on share deals
Schedule I - Corporate
- I.2Review current articles of association and prior versions adopted within the last six years.[CA 2006 s.18]Severity A
- I.4Review statutory registers (members, PSC, directors, secretaries, charges).[CA 2006 s.113]Severity A
- I.5Verify PSC register against the Companies House public record and identify any discrepancies.[ECCTA 2023 Part 1]Severity A
- I.6Reconcile issued share capital against share-certificate counterfoils and Companies House SH01 filings.[CA 2006 s.554]Severity A
- I.9Obtain shareholder agreements, drag/tag arrangements and any side letters.Severity A
- I.14Identify any unfiled or overdue Companies House filings; check for proposed strike-off.[Companies House]Severity A
- I.20Confirm dividend history was lawful (sufficient distributable reserves at each date).[CA 2006 Part 23]Severity A
Schedule III - Tax
- III.1Obtain corporation-tax computations and CT600 returns for the last six years.[CTA 2009]Severity A
- III.2Identify any open HMRC enquiries, discovery assessments or pending litigation.Severity A
- III.5Review R&D tax-credit claims: methodology, supporting file, advance assurance.[HMRC R&D]Severity A
- III.13Review employment-related securities (ERS) returns, EMI option grants and 90-day notifications.Severity A
- III.14Confirm EMI option grants meet qualifying-trade and individual-limit conditions.Severity A
- III.15Identify any disguised-remuneration or loan-charge exposures.Severity A
- III.21Obtain tax-deed draft and reconcile scope to identified exposures.Severity A
- III.22Confirm any exit-charge or de-grouping considerations under the proposed deal structure.Severity ABuy-side
Schedule V - Legal
- V.1Obtain schedule of all current and threatened litigation; quantify exposures.Severity A
- V.4Confirm assignment of IP from founders, contractors and former employees.Severity A
- V.7Sample top-20 material contracts for change-of-control, termination and indemnity.Severity A
- V.12Identify any director or officer disqualification, censure or fitness-and-propriety issue.Severity A
- V.13Confirm regulatory licences and any consent required on change of control.Severity A
- V.16Identify any contractual obligation triggered by the transaction (anti-assignment, MAC).Severity A
Schedule XII - Insurance
- XII.4Confirm any policy exclusion or aggregate erosion that affects buyer.Severity A
- XII.10Identify any uninsured historical exposures requiring SPA indemnity.Severity A
This page is anchored to UK primary legislation and named regulator guidance only. Not legal advice. Confirm position with your appointed adviser before signing.