Pre-exit housekeeping: the eighteen months that decide what you keep

Founders tend to think of selling a company as a negotiation. In our experience, the number on the term sheet moves less than the number that survives diligence, escrow, warranties and tax. And almost everything that decides that gap is fixed, or left unfixed, long before the sale process starts.

The useful window is eighteen months. Some of it is available at twelve. Very little is available at three.

Why eighteen months?

Three things set the clock. The tax rules punish last-minute changes, a move abroad takes time to be believable, and buyers inspect your history.

• Anti-avoidance rules and holding periods. Many tax reliefs and exemptions need you to have held the asset for a minimum period. Many countries also apply a "motive" or "purpose" test, which asks why you made a change. A change made during a live sale process will fail it.
• Moving your tax home takes time to be real. Changing where you (or your company) count as resident for tax needs a full tax year, physical presence and evidence. Announce it in month two of a sale and nobody will believe it.
• Diligence looks back. Diligence is the buyer's deep check of your business. They examine the last three years of agreements between your own companies, board minutes and tax filings. Documents written after the event look exactly like what they are.

The pre-exit checklist

There are six areas to check. Work through them in order, and expect to find something in at least four.

1. Cap table and share classes

Your cap table is the list of who owns what. It needs to match the paperwork exactly.

• Reconcile the share register with every share issue, transfer and option grant since the company began. Gaps here delay completion more often than anything else.
• Check that your option scheme is valid, how options are exercised and how they're taxed in each employee's country. A scheme designed for one country and rolled out to five is a common and expensive discovery.
• Deal with dormant or disputed shareholdings. A 0.5% holder who can't be found can hold up a deal.
• Make sure drag-along and tag-along clauses actually work at the threshold you intend. (Drag-along lets majority owners force the minority to sell. Tag-along lets the minority join a sale.)

2. Who owns the IP

IP means intellectual property: your code, brand, domain names and designs. The company being sold should own all of it.

• Every line of code, brand, domain and design should belong to the entity being sold, with a signed assignment from every founder, employee and contractor. Contractors are the usual gap, because an invoice is not an assignment.
• Register trade marks in your core markets. Buyers discount brands that aren't registered.
• If the IP sits in a separate entity, the licence to the operating company must be written down. The terms should be arm's length (what unrelated parties would agree), and they should match how the group actually behaves.

3. Deals between your own companies

If you have more than one company, they trade with each other. Buyers want to see that on paper.

• Put written agreements in place for every flow between your companies: services, licences, loans, cost sharing. Back them with transfer-pricing analysis (proof the prices are fair) sized to the amounts involved.
• Reconcile the balances between companies. Then settle them, or document them as loans with proper terms.
• Board minutes should show that each company's own directors approved its own arrangements.

4. Structure

Structure is how your companies and assets are arranged.

• Check you're selling the right entity. A buyer usually wants a clean operating company, or a holding companyHolding companyA company whose main job is to own shares in other companies. with only the relevant subsidiaries beneath it. Non-core assets, such as property, investments or a founder's side venture, should come out well in advance, with the tax consequences accepted deliberately.
• Have real substance where you claim it. If a holding company claims treaty benefits on a sale (tax breaks under agreements between countries), its board activity must support that claim for the periods that matter.
• Check the conditions for a participation exemption or substantial shareholding relief (tax breaks for selling shares in a company you own a big stake in) against the actual facts, including holding period and activity tests.

5. Your personal position

• Know your residence and domicile as they'll be at completion, and be able to evidence them. Domicile is roughly the country you treat as your permanent home.
• If you're planning to move abroad, complete the move a full tax year before completion, with real presence in the new country.
• Consider whether to hold shares personally, through a holding company or in trust. Note that transfers into a structure during a sale process are usually taxed at market value and may be recharacterised, meaning treated as something other than what you intended.
• Model your after-tax proceeds under each scenario before you agree the deal structure. Cash, shares, earn-out and loan notes have very different tax profiles.

6. Housekeeping that buyers price

Buyers knock money off the price for mess. Check these:

• Filed and current accounts, tax returns and statutory registers in every country you operate in.
• Employment contracts and contractor classification. Misclassified contractors are a warranty issue.
• Data protection compliance, written down, where customer data matters to the business.
• Customer contracts, for change-of-control clauses (terms that let a customer walk away or renegotiate when ownership changes).
• Litigation, disputes and regulator correspondence, collated with a written position on each.

Where are the grey areas?

Most of this article is settled good practice. The grey parts are about what happens to changes made close to a sale, because tax authorities and buyers judge them by motive and by what the facts actually show.

What stops being available?

Once a buyer is engaged, these doors mostly close. The nearer you are to a deal, the fewer options you have.

• Moving IP, extracting non-core assets or inserting a holding company will generally be taxed on market value and viewed as sale-motivated.
• Changing residence has no credibility for the transaction.
• Reconstructing minutes or agreements is worse than having none.
• Renegotiating employee option terms becomes a disclosure item (something you must tell the buyer about).

What if part of the price is paid later?

If you're paid partly later, tax depends on two things: whether the right to that future money can be pinned down at completion, and how your country's rules value it. This affects both timing and rate. An earn-out is a payment that depends on how the business performs after the sale; deferred consideration is simply money paid later.

Model it before heads of terms are signed. After that, the structure is agreed and the tax follows it.

Quick answers

Is it too late if a buyer has already approached?

Not for everything. Cap table, IP assignments and documentation can still be fixed. Structural and residence changes are largely gone.

Should I put shares into a trust before exit?

Sometimes, and it must be done early. Transfers close to a sale are typically valued at deal price and may not achieve the intended outcome.

Do I need a tax opinion?

For a material transaction, yes. Buyers ask for one, and it supports warranty and indemnity insurance pricing.

How much does pre-exit work cost?

Far less than the diligence discount it prevents. Most of it is documentation discipline rather than exotic planning.

Related reading

• Cross-border structures where founders lose value
• Mid-year structuring report 2026