Would it be better to take over the shares or the business?

The transfer of shares

When you purchase all the shares in a company, you are purchasing the entire underlying business.

The company that operates the business therefore remains the owner of the business. Only the underlying shares change ownership.

You thus become the shareholder and therefore the owner of the company as a whole.

You cannot choose not to transfer certain elements of the business, as they are all part of the company.

If you acquire the shares in a company, you therefore acquire all assets and liabilities. The following will always be transferred:

• Employees
• Current agreements (suppliers, subcontractors, customers)
• Permits
• Customer base
• Name of the business
• Debts (even if they predate the transfer)
• Loans
• Past liabilities
• Company number and VAT number

The advantage of this transfer is that, in principle, nothing changes within the company: contracts remain valid, staff remains employed, and orders remain.

Since you are taking over all assets and liabilities, you, as the buyer, will not be protected from past risks. This is the biggest disadvantage of this transfer method: you are also taking over the past, meaning that skeletons can sometimes be discovered later.

For this reason, when transferring shares, we recommend that the buyer at least conduct a thorough due diligence review of the company's accounting and administration and include the necessary guarantees in the transfer agreement, including a financial guarantee or a payment plan for the purchase price.

The transfer agreement is the only basis you can rely on should any problems arise within the acquired company.

It is therefore important to seek proper guidance from professionals, both legal and accounting.

The transfer of business assets

When transferring a business asset, you don't acquire any shares in the company. You only acquire the components of the business described in the acquisition agreement.

Transferring a business asset is therefore much more flexible: you purchase the elements of the business you want to acquire and leave the rest with the seller.

For example, the following components are often described as part of the business asset:

• Trade name
• Customer base
• Inventory
• Website/webshop/social media
• Brands and intellectual property rights
• Current agreements*

You acquire these components with your own company or business. The company will be able to continue the business with the acquired assets.

The advantage of this transfer method is that you, as the buyer, can choose which assets you wish to acquire.

Often, a buyer logically chooses not to take over loans and other debts of the business. You will, of course, have to reach an agreement on this with the seller, who has a vested interest in transferring these liabilities.

There are also some disadvantages to this transfer method.

For example, current agreements usually cannot be transferred without the consent of the contracting party involved. This may therefore require renegotiation with suppliers, subcontractors, and so on.

An additional disadvantage is that the buyer is often legally required to take on the company's employees as well. Therefore, you cannot simply refuse to take on an employee of the business.

Finally, you should also keep in mind that as the buyer of a business, you are jointly and severally liable for the payment of the seller's tax and social security debts. To avoid this risk, we always recommend requesting the necessary tax and social security certificates in the seller's name before the transfer, confirming that there are no outstanding debts.

When do you choose which transfer method?

In general, we observe that entrepreneurs often make the following choices, considering the advantages and disadvantages listed above:

Entrepreneurs often choose to transfer shares in the following cases:

• Continuity is essential
• Key contracts are not readily transferable
• The company is subject to licenses
• There is complete transparency regarding its operations and financial situation
• You have been able to thoroughly review the accounting
• There are no high-risk debts or pending legal proceedings

Entrepreneurs, on the other hand, often choose to transfer business assets if:

• The administration is not in order
• There is a lack of complete transparency regarding the accounting
• The company also has other activities
• They only want to acquire the brand/trade name
• There are liability claims or pending legal proceedings

Naturally, every acquisition is unique, and the choice between the two acquisition methods depends on all the specific circumstances, tax implications, and personal factors.