What happens to the energy contract when you buy or sell a business?

Buying a business is exciting enough without worrying about who pays the electricity bill. But the energy contract is one of the things due diligence regularly misses, and what happens to it depends entirely on how the deal itself is structured, not on anything you agree separately with the supplier.

Does the existing energy contract transfer automatically?

It depends on whether you bought the company or just its assets. This single distinction decides almost everything else in this guide.

• Buy the company (a share sale) and you have bought the legal entity that holds the contract. Nothing about the contract itself changes: same rates, same end date, same obligations, same any debt. The company you now own was always the customer, and it still is.
• Buy the business (an asset sale), taking over premises, stock, equipment and goodwill but not the seller’s company itself, and you are a new legal occupier of the site. The seller’s company remains, in law, the party to its existing energy contract, unless something is done to change that. You do not inherit its rate simply by moving in and taking over.

What happens in a share purchase?

Very little changes from the energy supplier’s point of view. The company is the customer both before and after completion, so its contract, whatever rate, term and conditions it carries, continues uninterrupted. There is no need to notify the supplier of a change of tenancy, because there has been no change of occupier in the legal sense the supplier cares about.

What you should still do as the buyer:

• Read the contract itself during due diligence, not just the current bill, so you know the rate, the end date, and any exit fee you would face if you wanted to leave early.
• Check for any outstanding debt or unresolved dispute on the account, since you are buying the company with that history attached.
• Check whether a security deposit is held, and what its terms are, since our guide to business energy credit checks and deposits explains these are tied to the contracting party’s creditworthiness, which is about to change hands.
• Update the supplier’s records with new contact and management details even though the contract itself is unaffected, so future correspondence reaches the right people.

What happens in an asset purchase?

This is where it gets more involved, because you are treated as a new occupier of the premises rather than a continuation of anything. Ofgem’s guidance on change of tenancy for businesses specifically lists a property sale as one of the situations that triggers the change of tenancy process, alongside a business relocating and, separately, bankruptcy. Buying a business’s premises and trade as assets falls squarely into this category, even though nobody is physically moving anywhere.

Under Ofgem’s process:

1. You (or your solicitor or broker) notify the current supplier of the change in occupier as soon as possible, ideally before completion.
2. You provide evidence. Ofgem’s guidance accepts property sale documents and title deeds, alongside a lease or tenancy agreement, a business rates bill, or a letter from a bank, solicitor or landlord.
3. The supplier reviews the evidence within 10 working days. It should then either set up your account, reject the change and explain why, or ask for more information, explaining clearly what is missing.
4. Until this is resolved, the legal position mirrors what happens under the Electricity Act. Schedule 6 to the Electricity Act 1989 provides that where electricity is supplied without an express contract, the supplier is deemed to have contracted with the occupier, which from the date of completion is you. This is the same mechanism that puts you on a deemed rate the moment you take over occupation, whether or not the paperwork has caught up yet.

Our guide to change of tenancy covers this process in full, including how to find out who currently supplies the premises if that is not obvious from the paperwork you have been given.

Can you keep the seller’s existing contract and rate?

Not automatically, and there is no rule guaranteeing it. Once you are recognised as the new occupier under an asset purchase, you are generally moved onto a deemed contract at the supplier’s standard deemed rate, which is usually higher than a negotiated deal, rather than being handed the seller’s existing terms. You can ask your supplier whether it is willing to formally transfer, or novate, the existing contract to your company instead of starting a fresh deemed arrangement, but whether it agrees is entirely at its discretion. In many cases it will be more straightforward, and just as cheap, to treat the change of tenancy as an opportunity to shop around properly rather than try to inherit a contract that was negotiated for someone else’s circumstances.

What if you are the one selling?

The same distinction runs in the opposite direction. If you are selling your company through a share sale, its energy contract simply goes with it: you have no separate step to take with the supplier, though you should still tell your accountant and make sure the buyer’s due diligence gets accurate information about the account. If you are selling as an asset sale, your company remains the party to its own contract even after completion, since the contract does not transfer with the premises automatically. You need to close it down in exactly the way our guide to energy bills when a business closes describes: notify the supplier, give a final meter reading on or around completion day, and settle the final bill, rather than leaving the account open on the assumption the buyer will simply take it over.

Sellers sometimes assume that because the buyer is taking over the premises and, informally, “the business”, the energy account will quietly follow. It will not, and both sides can end up disputing who owes what on the final bill if nobody has confirmed the handover with the supplier directly.

What about a business with more than one site?

If the business being bought or sold operates across several premises, each site’s contract needs the same check individually. A single company can easily have a mix of contract types across its estate: some sites mid-fixed-term, others rolled over, others on an out-of-contract or deemed rate, particularly if different sites were acquired or opened at different times. Our guide to multi-site business energy covers how contracts are typically managed across several premises, which is worth reading alongside this guide if the deal you are working on involves more than one location.

What should you check before you complete?

However the deal is structured, build these checks into your due diligence rather than leaving them until after completion:

Check	Why it matters
Contract end date and notice terms	Tells you whether you are inheriting a fixed deal, a rollover, or an out-of-contract rate, and what happens next
Current unit rates and standing charges	Lets you judge whether the existing deal is competitive, particularly relevant in a share sale where you keep it
Any exit fee	Relevant if you plan to switch supplier shortly after completion
Outstanding balance or dispute	An unresolved debt can affect your ability to switch and, in a share sale, becomes your debt
Security deposit held	Confirms whether money is tied up with the supplier and under what terms it is returned
Broker involvement	Check whether a broker is owed ongoing commission or has a letter of authority in place that needs updating
MPAN and MPRN details	Confirms exactly which meters and supplies are covered by the contract you are reviewing

Who is liable for unpaid energy debt from before the sale?

This depends on the structure of the deal and what the sale agreement itself says, and it is a question for your solicitor rather than something a general guide can settle for you. As background only: in a share sale, you are buying the company complete with its existing liabilities, including any energy debt, unless the sale agreement specifically addresses this (for example through a price adjustment or an indemnity from the seller). In an asset sale, liabilities generally do not transfer automatically with the assets, and the purchase agreement will usually set out explicitly which, if any, existing debts or contracts the buyer is taking on. Do not assume either way. Get this term checked and agreed in writing before you complete.

A worked example

Say a buyer is acquiring a single café through an asset purchase, taking the lease, fittings and goodwill but not the seller’s limited company. As an example only, with made-up figures: the seller’s existing electricity contract has eight months left on a fixed term at a competitive rate. Because this is an asset sale, that contract does not transfer to the buyer. From the day the buyer takes occupation, the supplier is entitled to treat the buyer as being on a deemed contract under the Electricity Act, typically at a higher rate than the seller was paying, until the buyer either agrees new terms with that supplier or switches. The seller, meanwhile, still needs to close its own account with a final meter reading on completion day, regardless of what the buyer decides to do next. Two separate processes, running from the same completion date, each needing its own action. Had the same café instead been bought through a share sale, buying the limited company itself rather than just its lease and fittings, the eight months remaining on that fixed-term contract would simply have continued under the new ownership, at the same rate, with no deemed contract or change of tenancy process involved at all.

Using a letter of authority during the purchase process

If you or your broker need to see billing history, consumption data or contract terms before completion, without yet being the account holder, a letter of authority from the current business owner lets a third party, including a prospective buyer’s adviser, request that information from the supplier. This is worth arranging early in a deal, since suppliers can take time to process authority requests and you do not want it holding up your due diligence timetable.

What if the business you are buying is already on a rollover or deemed rate?

It happens more often than buyers expect: the business you are acquiring has already drifted onto an expensive default rate before you even started negotiating. Check this specifically, since a rollover contract or an out-of-contract rate both cost more than a negotiated deal, and inheriting one (in a share sale) or being defaulted onto one yourself (in an asset sale) is exactly the kind of hidden cost that is easy to miss until the first bill after completion arrives.

Once the deal is done and you know where you stand, you can compare business energy quotes with us.

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