At a glance
| Share sale | Asset sale | |
|---|---|---|
| What transfers | The shares in the company | Selected assets or the business |
| Who receives the price | The shareholders | The company |
| Historical liabilities | Stay with the company | Usually stay with the seller, unless agreed |
| Contracts | Usually continue; check change-of-control clauses | Need to be transferred, often with consent |
| Staff | Employer stays the same company | Section 197 may apply on a going-concern transfer |
Asset sale
The buyer chooses the assets it takes. A sale of selected assets is different from the transfer of a business as a going concern, and the distinction affects both staff and VAT.
Staff and section 197
When a business is transferred as a going concern, section 197 generally moves employees to the new employer on terms no less favourable, with continuity of service. Its application depends on the facts, so not every asset sale automatically transfers staff. Accrued leave and other obligations should be disclosed and allocated in the agreement.
VAT on a going-concern sale
A going-concern sale between VAT vendors can be zero-rated under section 11(1)(e) of the VAT Act, but only when its specific conditions are met and recorded in writing. It is not automatic.
Terms that protect you
- Warranties and their limits
- Indemnities for known risks
- Third-party consents
- Price adjustments for debt and working capital
Compare after-tax proceeds
The tax result for the seller can differ significantly between the two structures. Compare net proceeds with your accountant before agreeing the structure.
Common questions
Can the buyer leave liabilities behind?
In an asset sale, generally yes, unless the agreement says otherwise. In a share sale the liabilities stay with the company the buyer acquires.
Do staff keep their service?
In a share sale the employer does not change. In a going-concern transfer, section 197 generally preserves continuity of service.
Must every contract transfer?
In an asset sale, only the contracts the parties agree, and many need the other party's consent.
Is a going-concern sale always VAT-free?
No. Zero-rating applies only if the section 11(1)(e) conditions are met.
Not sure which structure suits you?
Tell us confidentially about your business. We will explain the options before any buyer is approached.
Related guides
Last updated October 2026. This guide is general information on South African regulatory procedure and is not legal advice on your specific matter. Dynamic Legal Services (Pty) Ltd is a private legal advisory firm and is not a government department or regulator.