How does a secondary share sale work (UK guide)

Disclaimer: This information in this article is for general informational purposes only and does not constitute financial, tax, or legal advice. See full disclaimer.

If you’ve invested in a startup in the UK or are an employee with shares in the company you work for, you’ll need to know about the different options available for liquidating assets or earning returns.

One potential route is a secondary share sale, which is becoming increasingly popular in both the UK and the US.

But what exactly are secondary share sales and how do they work? Read on to find out everything you need to know, including info on tax, legal framework and the steps involved.

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What are secondary share sales?

A secondary share sale is the transfer of existing shares in a private or public company from one shareholder to another. Shareholders sell holdings to other investors, rather than the company issuing new shares. This means no new capital is raised.

This allows for transfer of ownership without any changes to the company balance sheet, and without diluting other stakeholders.

Secondary sales (known as secondaries) often involve founders, early investors or employees of startups, who are looking to liquidate some of their holdings before an initial public offering (IPO) or acquisition. It’s seen as an exit alternative, often in response to delays in a company going public.

Key factors involved in secondary share sales:

• Pricing - buyers and sellers are free to set and negotiate on price, but typically the latest post money value is used (potentially with a discount)
• The amount of shares sold is always less than 50% of the total share capital, as otherwise a full-scale exit or merger/acquisition would be triggered. It’s usually a very small percentage of total shares being sold.
• The company’s board needs to approve the transaction. It may also have contractual stipulations such as right of first refusal (ROFR), which give the company or existing investors the first option to purchase shares before an external buyer.

What’s the difference between primary and secondary share sales?

A primary share sale is when the company issues newly created shares to investors, in order to raise capital.

A secondary sale is when existing shareholders sell their own shares to other buyers, and the proceeds go directly to the selling individual, not the company.

How does a secondary share sale work? Step-by-step

Here’s how the typical process of secondary share sales works:

1: A shareholder decides to sell their shares - or the company initiates the process

An existing shareholder decides to sell their shares, after checking for any restrictions or conditions in the company’s Articles of Association. For example, the need for board approval, or pre-emption rights (right of first refusal).

However, in many cases the company itself initiates the sale, in order to provide liquidity to its early founders and employees. In this case, a structured process for the transaction may be set out.

2: Potential buyers are found

The next step is to find individuals looking to buy shares, and these are typically sourced through existing investors, networks or specialist brokers.

3: Price negotiations

With buyers found, the per-share price can be negotiated. The price is often based on recent valuations, or comparable transactions within the same company or a similar competitor.

4: Company approval

If required, the company’s board of directors will review and approve the transaction. This is done according to the company’s constitutional documents and policies, and in line with any legal or regulatory conditions/restrictions.

5: Documentation and legal processes

Legal teams handle the paperwork, which involves drafting a sale and purchase agreement (SPA). This is a legally binding contract for the transaction, setting out its terms and conditions.

6: Payment and transfer

Funds are exchanged, shares are transferred and the change of ownership is recorded in the company’s cap table.

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How are secondary sales regulated in the UK?

Secondary share sales are generally governed by contract law in the UK, along with the terms of the company’s own constitutional documents, such as its Articles of Association and Shareholder’s Agreements.

The latter may contain conditions which can complicate a sale, such as right of first refusal (ROFR) or right of first offer (ROFO) which put existing investors priority first in the priority order of purchasers.

These are privately agreed sales between buyers and sellers, so it's recommended to get professional legal advice and take all precautionary measures against fraud.

However, platforms do exist to provide formal exchanges for secondary share trading. This is mainly in the US, with the likes of platforms such as Forge Global, EquityZen and Nasdaq Private Market.

In the UK, a brand new platform for secondary share trading was launched in early 2026 by the London Stock Exchange (LSE). It’s called the Private Intermittent Securities and Capital Exchange System (PISCES), and it’s a pioneering, government-backed financial framework and regulated stock market.

PISCES allows private companies to let investors and employees buy and sell their shares during scheduled trading events. It’s strictly a secondary market, open only to institutional investors, employees of the company, and high-net-worth investors - it’s not open to the general retail public.

Tax considerations for secondary share sales

Both buyers and sellers in secondary share sales need to be aware of their UK tax obligations.

For buyers, there is Stamp Duty to pay, unless they are exempt or eligible for relief.

For sellers, Capital Gains Tax (CGT) may apply to profits made from the sale, above their tax-free CGT Annual Exempt Amount.

However, tax can be extremely complicated, especially when it comes to investments. So it’s strongly recommended to seek professional tax advice before entering into any transaction.

Key takeaways

• Existing shareholders transfer their current shares in a private or public company directly to another investor, meaning no new capital is raised and no stakeholder dilution occurs on the company balance sheet.
• The total amount of shares traded in a secondary sale must remain under 50% of the company's total share capital to avoid triggering a full-scale merger, acquisition, or exit.
• Transactions require company board approval and are bound by internal constitutional rules, such as a Right of First Refusal (ROFR) or Right of First Offer (ROFO), which prioritize existing investors over external buyers.
• The London Stock Exchange launched a regulated, government-backed secondary trading platform in early 2026 called PISCES (Private Intermittent Securities and Capital Exchange System), allowing private firms to run scheduled trading events for institutional, employee, and high-net-worth investors.
• Buyers are typically responsible for paying UK Stamp Duty on the transaction, while sellers may face Capital Gains Tax (CGT) obligations on profits that exceed their annual exempt allowance.
• The legal process requires drafting a legally binding contract known as a Sale and Purchase Agreement (SPA) before funds are exchanged and the company's capitalization table is updated.