Shares or assets? The strategic decision that defines your business transfer
When taking over a business in Belgium, as an entrepreneur you are faced with an important decision with legal, financial and tax consequences. Do you opt for a share transfer (share deal) or for a transfer of assets (asset deal), also called transfer of trade fund or trade business? This decision is the basis of the entire acquisition process and therefore deserves special attention.
Two different approaches, one common goal
In both a share transfer and a trade fund transfer, the goal is to continue the economic activity of the company uninterrupted. However, the path to that goal varies considerably, which has important implications for both the seller and the buyer.
In a transfer of shares (share deal) the ownership rights of the company itself are transferred. The shareholders sell their participation in the company to the acquirer. The company, as a legal entity, remains exactly the same - only the owner changes.
Want to learn more about all aspects of a share transfer, including the pre-contractual stage, due diligence, and contractual protections? Then visit our share transfer page.
In a transfer of assets (asset deal) the company itself is the seller. It sells specific parts of its assets to the buyer. This can range from a few carefully selected assets to an entire line of business or the entire trading fund. In doing so, the buyer can be selective and determine exactly which elements are acquired and which are not.
For an in-depth analysis of the specifics in an asset deal, including the transfer of personnel and liability for debt, please see our page on transferring a trading fund.
The legal dimension: rights, duties and risks
Share deal: continuity with consequences
In a share transfer, the company continues to exist as a legal entity. This has far-reaching consequences:
- The company and VAT number remain unchanged
- Existing bank accounts remain active
- Contracts run automatically (unless concluded intuitu personae)
- Permits are automatically transferred with it
- All employees remain employed under the same conditions
This continuity is an important advantage, but it also carries risks. This is because the acquirer takes over the entire company, including all unknown or hidden liabilities from the past. This explains why thorough due diligence is so important in a share transfer - the buyer wants to know exactly what he might be liable for.
Asset deal: selectivity as an asset
In a transfer of constituents, the buyer can choose exactly which elements to take over. Anything not expressly transferred remains the property and responsibility of the selling company. This selectivity is a great advantage, but there are important nuances:
- The transfer of an entire trade fund or an autonomous industry should take into account CLA 32bis: the personnel associated with these activities will automatically transfer with them, retaining their rights and working conditions
- The acquirer may potentially be liable for tax and social security debts unless the necessary certificates are obtained and proper notification procedures are followed
Financial considerations: valuation and pricing
The valuation method differs fundamentally between the two forms of transfer:
On an asset deal the price is usually determined based on the market value of the specific assets being acquired. Tangible assets such as buildings and machinery as well as intangible elements such as know-how, customer portfolio and brand name are valued individually.
On a share deal relies rather on financial results and the book value of the company as a whole. Taking into account depreciation and other accounting factors, the market value of individual assets generally exceeds their book value. This can lead to significant valuation differences.
A telling example is real estate in a corporation. In a share transfer, this often changes hands for a lower price than if it were sold directly as real estate, even if adjustments are made to the book value.
Tax implications: often the deciding factor
The tax treatment of the two transfer forms differs greatly, which is often decisive in the choice:
For the seller
Share deal (natural person as seller): If the transfer falls outside the professional activity of the seller and within the normal management of private assets, it is in principle tax-free. This makes the share transfer fiscally very attractive for the selling shareholder-natural person. Note: according to the Dewever coalition agreement, there will soon be a capital gains tax on shares be introduced.
Asset deal: The company that sells assets is taxed on the capital gains realized at the normal corporate tax rate. Only under specific conditions can these capital gains be taxed on a spread basis.
For the buyer
Asset deal: The acquired assets can in principle be depreciated, which provides a tax benefit by reducing the taxable base.
Share deal: Shares cannot be amortized, which can be a significant tax disadvantage for the acquirer.
When to choose to transfer shares?
A share deal is often appropriate when:
- Continuity of business is essential (maintaining contracts, licenses, etc.)
- The seller is an individual seeking tax benefits
- The company has few hidden or unknown liabilities
- The company has minimal debt or debt that is favorably financed
Find out all the details, pitfalls and optimization opportunities in a share transfer at our share transfer page, where we discuss in more detail due diligence, warranties and protection clauses for both buyer and seller.
When to choose to transfer components?
An asset deal is preferred when:
- Selectivity is important (acquiring only certain assets)
- There are significant risks or uncertainties associated with the company
- The buyer tax depreciation on the acquired assets desires
- The selling company is loss-making or heavily indebted
- Certain activities are continued while others are discontinued
For some of the concerns involved in an asset deal, such as the transfer of personnel or liability for debt, we invite you to visit our page on the transfer of a trading fund consulting.
Professional guidance from a lawyer: the key to a successful transfer
The choice between a transfer of shares or constituents is complex and depends on several factors, including:
- The specific circumstances of the transfer
- The tax situation of both buyer and seller
- The presence of specific risks or liabilities
- The need for continuity of operations, contracts and permits
- The acquirer's financing options
A thorough legal, financial and tax analysis is essential to arrive at the most optimal structure. Our law firm has extensive expertise in business acquisitions and can guide you through the entire process, from initial considerations to the final transfer and post-transaction aspects.
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