Change of control clauses – the hidden risk in business sales

October 19, 2026

Change of control clauses – the hidden risk in business sales

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By Georgina Rees

Read time: 3 minutes

When buying or selling a business, much of the focus understandably falls on price, structure and timing. However, one often overlooked issue can have a significant impact on the success of a transaction. This being change of control clauses.

These provisions are commonly found in commercial contracts and can, in some cases, derail or materially affect a deal if not identified early.

In this article, our corporate solicitor, Georgina Rees, explores the role of change of control clauses in commercial contracts and the implications they can have during a business sale.

What is a change of control clause?

A change of control clause is a contractual provision that is triggered when ownership or control of a company changes. An example of this is when shares are sold, or a new majority shareholder is introduced.

Depending on how it is drafted, a change of control clause may give the other party rights such as:

• The right to terminate the contract
• The right to require repayment of outstanding sums (particularly in finance agreements)
• The ability to renegotiate terms
• The right to withhold consent or impose conditions

These clauses can shift control away from the parties to the transaction and into the hands of third parties.

Where do these clauses typically appear?

Change of control provisions are more common than many businesses expect. They are frequently found in:

• Loan agreements and finance arrangements
• Key customer or supplier contracts
• Hire purchase or asset finance agreements
• Insurance policies

While they may seem like “standard wording”, their effect can be significant in practice.

Why do they matter in a sale?

From a buyer’s perspective, change of control clauses create commercial risk.

For example:

• A lender may demand immediate repayment of a loan following completion
• A key supplier may terminate a contract, disrupting operations
• An insurer may refuse to continue cover without renegotiation

From a seller’s perspective, these provisions can affect:

• Value – if key contracts are at risk, this may reduce the purchase price
• Deal certainty – unexpected terminations or consents can delay or frustrate completion
• Negotiations – buyers may seek protections such as price adjustments or indemnities

In short, failing to identify and deal with these clauses early can lead to unwelcome surprises late in the transaction.

A practical example

Consider a scenario where a company has a hire purchase agreement in place for essential equipment or vehicles. The agreement includes a change of control clause allowing the finance provider to terminate the agreement or require early repayment if the company is sold.

If this is not addressed prior to completion, the buyer may find themselves required to settle the outstanding balance immediately or lose access to the asset. Either outcome could have a direct financial impact and potentially disrupt business operations.

What should businesses do?

The good news is that change of control risks can usually be managed with proper planning.

Some practical steps include:

1. Identifying relevant clauses early – during due diligence, it is important to review all key contracts carefully to identify any change of control provisions. This allows time to assess the potential impact.
2. Assessing the risk – not all clauses carry the same risk. Some may require consent, while others provide for automatic termination. Understanding the specific wording is crucial.
3. Engaging with counterparties – in many cases, the issue can be addressed by obtaining consent from the relevant third party in advance of completion. Early engagement can prevent delays.
4. Reflecting the position in the transaction documents – where risk remains, this can often be managed through the sale agreement for example, by way of price adjustments, conditions precedent, or indemnities.
5. Taking a holistic view – change of control clauses should be considered alongside other deal issues, including financing, operations and commercial relationships.

Final thoughts

Change of control clauses are a common feature of commercial contracts, but their importance is often underestimated. Left unchecked, they can introduce risk, affect value, and complicate what might otherwise be a straightforward transaction.

By identifying these provisions early and taking appropriate steps to manage them, both buyers and sellers can help ensure a smoother and more predictable deal process.

If you are considering buying or selling a business and would like advice on reviewing your contractual arrangements, please get in touch with our specialist M&A solicitors using the contact form or on 02920 829 100 to see how we can help.