Share Sale vs Asset Sale: What Every Practitioner Should Know

10 Sept

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When clients talk about “selling their business,” they often don’t realise that there are two very different routes: selling the shares of the company, or selling the assets and liabilities inside the company. On the surface it may sound the same, but in practice the legal, tax and accounting consequences are worlds apart. As a Business Accountant in Practice, you’ll often be called on to explain the difference in plain terms — and to guide clients through the choice.

The Share Sale – Buying the Whole Box

In a share deal, the buyer purchases the company itself. Nothing inside the business changes — all the assets, debts, contracts, and staff remain as they are. The only thing that changes is the shareholder register.

From a practical standpoint, this is neat and simple. The company’s financial records, tax registrations, and licences continue uninterrupted. But it also comes with risk: any hidden skeletons in the company cupboard (outstanding SARS queries, litigation, unpaid creditors) move along with the sale.

Tax impact:

The seller (shareholder) pays capital gains tax on the profit from selling shares.
The company itself carries on unaffected.
The cost sits as an investment on the books of the buyer or in their personal capacity.

The Asset Sale – Picking and Choosing

In an asset deal, the buyer chooses specific assets (like equipment, stock, contracts) and sometimes takes over certain liabilities. The company itself remains behind, often to be wound up later.

This route is attractive to buyers because they can avoid unwanted debts or risks. But it’s more complex: each asset transfer may require contracts to be renegotiated or licenses re-applied for.

Tax impact:

The selling company records the disposal of assets and pays normal tax or capital gains tax on the profit.
The buyer records the assets at purchase price and can claim future tax deductions (depreciation, wear and tear).
The transaction reshapes the seller’s books — assets go out, cash comes in, and liabilities may be settled.

Practical Example

Imagine a client selling a business valued at R10 million:

Share sale: The buyer pays R10m for the shares. The seller (shareholder) faces CGT on the gain. The company’s books don’t change.
Asset sale: The buyer pays R10m for assets. The company records R10m proceeds, derecognises assets, and pays tax on any gains. The buyer sets up the assets in their own books and claims deductions going forward.

Which is Better?

It depends:

For the seller, a share sale is usually cleaner — they walk away with the proceeds and the company’s history goes with the buyer.
For the buyer, an asset sale often feels safer — they get what they want without taking on unknown debts.

The Practitioner’s Role

As CBAP practitioners, your value lies in cutting through the jargon and presenting the risks and benefits clearly. Help clients understand not only the numbers, but also the practicalities: continuity of contracts, tax consequences, and the long-term effect on their books.

The difference between selling shares and selling assets is simple in theory but carries huge consequences in practice. The next time a client says, “I want to sell my business,” your job is to ask: Do you mean the company, or the things the company owns?

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