Freehold Acquisition via a Property SPV

Freehold Acquisition via a Property SPV*

We acted for a manufacturer in the footwear industry that was already occupying its trading premises and wanted to acquire the property. Rather than purchasing the freehold directly, the acquisition was structured as a share purchase, with the client acquiring the property-owning SPV. This delivered a significant stamp duty saving, with stamp duty on shares charged at 0.5% compared to the higher rates applicable to a direct property acquisition.

*In plain English, “Freehold Acquisition via a Property SPV” means buying a freehold property by purchasing the company that owns it, rather than buying the property directly. “SPV” stands for Special Purpose Vehicle, which is usually a company set up to own a single property or asset.

While the transaction appeared straightforward on the surface, the reality was considerably more complex. Unlike a direct property purchase, a share acquisition involves buying an entire legal entity along with its history, liabilities and risks, both known and unknown.

The key challenges included:

• Establishing the true ownership of the target company’s shares where statutory records had not been properly maintained.
• Investigating potential employment-related liabilities.
• Identifying any historic or ongoing contractual commitments.
• Confirming the extent of the company’s asset base and any associated liabilities beyond the property itself.
• Satisfying lender requirements relating to both the property and the corporate structure.

Whilst not a challenge, we naturally worked with accountants and specialist tax advisors who did the financial and tax due diligence.

We carried out comprehensive legal due diligence on the company as well as the property itself, working closely with the client’s accountants to identify and assess financial and tax risks.

Our work included:

• Reviewing statutory registers and corporate records, requiring the seller to reconstruct incomplete records and provide indemnity protection where appropriate.
• Investigating financial information, historic tax returns and accounting records.
• Examining employment arrangements to identify potential claims or liabilities.
• Reviewing contractual obligations and contingent liabilities.
• Undertaking the usual property due diligence, including title investigations, searches and enquiries.
• Negotiating a robust Share Purchase Agreement, incorporating warranties and indemnities to protect our client.
• Reviewing and negotiating the accompanying Disclosure Letter.
• Preparing all ancillary corporate documentation, including Board Minutes, Director Resignations, Powers of Attorney and Stock Transfer Forms.
• Managing lender requirements throughout the transaction.

The acquisition completed successfully, enabling our client to secure ownership of its trading premises through a tax-efficient structure while mitigating the wider risks associated with acquiring a corporate vehicle.

Through detailed due diligence, careful risk allocation and comprehensive warranty protection, we provided the client with confidence that both the property and the company behind it had been properly scrutinised before completion

1. Look Beyond the Property

When acquiring a property through a company, you are purchasing an entire legal entity with its own history, obligations and potential liabilities. Thorough due diligence is essential.

2. Expect Additional Documentation

Share acquisitions involve significantly more corporate paperwork than a conventional property purchase, including Share Purchase Agreements, warranties, indemnities, board approvals and Companies House filings.

3. Don’t Rely Solely on Public Records

Companies House records do not always provide the complete picture. Private company records, statutory books and supporting warranties are critical in establishing ownership and identifying risks.