Alternatives to Closing a Company

Sale, Merger, or Transfer

|Attorney|Czech Bar Association Reg. No. 17955

Published:1/19/2026

The decision to cease operations is one of the most significant strategic decisions any business owner faces. In practice, however, company leaders often automatically assume that voluntary liquidation under § 187 et seq. of the Business Corporations Act is the only solution. This assumption does not reflect the reality of the Czech legal environment.

Key takeaways

Liquidation is not the only path: Sale of a company (share or asset deal), statutory merger, or asset transfer to a partner are faster and often safer alternatives to liquidation, which takes 6–12 months and carries liquidator personal liability risk.

Transaction structure fundamentally affects risks: Share deal is faster but buyers assume all hidden liabilities including disputes and tax debts. Asset deal allows selective asset choice but is administratively burdensome and requires transfers of numerous individual items. The right choice depends on the company's condition and parties' risk tolerance.

Automatic employee transfer is legal obligation, not choice: When selling or merging, employees transfer automatically to the new employer regardless of consent. Failure to inform 30 days in advance allows employees to leave with severance pay, potentially costing hundreds of thousands to millions of crowns depending on company size.

Largest financial risks lie in hidden liabilities and penalties: Failure to notify the Office for Protection of Competition of qualifying mergers can result in fines up to 10% of turnover (tens of millions of crowns). Unidentified employee debts, tax liabilities, or creditor claims may drastically reduce transaction value. Due diligence is not "formality" but the only defense against these risks.

Tax implications change dramatically in 2026 in favor of sales: Income from share and interest sales is exempt from tax from 2026 without limits if holding period test is met. Properly structured transactions can save millions of crowns compared to liquidation with 15–35% withholding tax on liquidation remainder.

ARROWS law firm

245 007 740 consultation@arws.cz

Conclusion of the Article

The decision on how to terminate a company is a strategic move affecting financial results, time, and management risks. As explained in this article, classical liquidation is not the only – and often not the best – solution.

Alternatives like share deals, mergers, or asset transfers allow for faster termination and better control over liabilities. Each route has specific legal, tax, and procedural considerations that must be carefully evaluated based on the company's situation.

Successful transactions require timely preparation, thorough due diligence, and professional legal support. Legal matters often hide complex exceptions and links to regulations that laypeople frequently overlook.

Employee transfers, competition office notifications, and cross-liability are critical aspects to manage during a transition. These factors can fundamentally affect the overall success and legal security of the entire project.

ARROWS Law Firm specializes in mergers and acquisitions, serving both domestic and foreign clients. Our international network enables us to provide comprehensive advice on complex cross-border transactions.

Handling these matters independently increases the risk of errors, fines, or personal liability for damages. Our firm handles this agenda daily, shortening transaction times and providing insurance coverage up to CZK 400 million.

If you need advice on the best path for your company, do not hesitate to contact us. Write to us at consultation@arws.cz so you can focus fully on your business.

FAQ – Frequently Asked Legal Questions About Alternatives to Closing a Company

1. Can I sell a company that has unpaid liabilities?

Yes, selling a company with liabilities is possible (particularly in a share deal), but the buyer assumes all liabilities including debts. Therefore, it is critical to conduct thorough due diligence and properly set the purchase price and buyer protection mechanisms (seller representations, escrow, price adjustment). If you are facing such a situation, write to us at consultation@arws.cz.

2. Is merger faster than liquidation?

Yes, a standard merger typically takes 3 to 6 months from project preparation to Commercial Register registration, whereas liquidation usually takes 6 to 12 months and includes a mandatory three-month creditor notice period. Merger also allows business relationships to continue without interruption.

3. Must I separately transfer all contracts in an asset deal?

It depends on the contract type. Some contracts require third-party consent for transfer (especially if they contain change of control clauses), while others are transferable without consent. All contractual documentation must always be reviewed. ARROWS Law Firm lawyers will conduct an audit of all material contracts and ensure transfer proceeds in accordance with legal and contractual conditions – write to consultation@arws.cz.

4. What is the notary's role in a merger?

The notary prepares a notarial record of the general assembly resolution approving the merger project. This notarial record is a legal requirement without which it is impossible to file the merger application in the Commercial Register.

5. Can I reduce risk of assuming hidden liabilities in a share deal?

Yes, several buyer protection mechanisms exist: (1) Thorough legal and tax due diligence to identify risks; (2) Seller representations and warranties in the agreement with indemnification mechanism; (3) Purchase price adjustment based on identified liabilities; (4) Escrow mechanism – part of the purchase price is temporarily held in escrow to cover potential future claims. ARROWS Law Firm structures transactions to maximize buyer protection – write to consultation@arws.cz.

6. Can I transfer a company to myself if I am sole shareholder and director?

Yes, asset transfer to a sole partner is a legal form of transformation. As acquiring partner, you must be an entrepreneur (holder of business authorization) and must prepare an asset transfer project under the Transformation Act. All company assets including liabilities transfer to you and the company ceases to exist without liquidation.

ARROWS law firm

245 007 740 consultation@arws.cz

About the author

Mgr. Oliver Uraz, LL.M.

Associate, partner

LinkedIn|Czech Bar Association Reg. No. 17955

Oliver Uraz as a lawyer focuses mainly on the litigation and filing claimsbefore courts and other bodies of all levels. He covers this agenda in all their contractual and procedural aspects, including bankruptcy issues. His expertise also includes a specialisation in insolvency law, where he offers comprehensive advice on reorganisations, bankruptcies and other aspects of insolvency law.

uraz@arws.cz 245 007 742

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Disclaimer:

The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (consultation@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.