How to Transfer a Business Share in a Limited Liability Company

First the Form, Then the Mechanics: Share Deal or Asset Deal

Before you start dealing with pre-emptive rights and verified signatures, clarify one thing: transferring an ownership interest is not the only way to hand over a company or part of it. The second option is the sale of an enterprise or part of it, i.e., the sale of a specific set of assets instead of a share in the company. In transaction practice, the English terms share deal and asset deal are used for these two routes.

The difference is fundamental and determines what the buyer actually gets. In a share transfer, the buyer acquires the entire company, and with it, its complete history—all assets, liabilities, obligations, and risks they may not be aware of beforehand. Thus, they take over not only the assets but also old contracts, potential debts, past tax risks, and ongoing disputes. In an asset deal, on the other hand, the buyer acquires only a defined set of assets and rights and can, to a certain extent, choose them; they do not acquire the legal entity with all its historical ties.

From a transactional perspective, a share deal is usually administratively simpler and requires less documentation than the transfer of individual assets. However, this simplicity only applies to the formal transfer, not the depth of due diligence. Precisely because the buyer takes over the entire history, a much more thorough due diligence and more sophisticated contractual documentation are necessary for a share deal. We cover the due diligence process separately in the article due diligence before a company acquisition.

One more note on the history of this decision. For companies whose main value is real estate, a share deal used to be more tax-efficient because it was not subject to the real estate acquisition tax. This tax has been abolished, so the original tax motivation for choosing the form of the transaction has disappeared.

The choice between a share deal and an asset deal today is therefore not primarily tax-driven but depends on what the subject of the transaction is and what risks lie within the target company. We discuss a detailed comparison of both options in the article the difference between a share deal and an asset deal. For companies with real estate, the choice of form has an even more significant impact—we cover this in the text transfer of a company that owns real estate.

If it's about selling an entire company, and not just a transfer of a share between partners, we describe the entire process from finding a buyer to signing in the article selling a company step by step. Practical procedures from transactions worth hundreds of millions are also summarized in the book How to Sell a Company with Real Estate by ARROWS' managing partner Jakub Dohnal.

Pre-emptive Right: Must You First Offer the Share to Other Shareholders?

If the articles of association of your s.r.o. (LLC) stipulate a pre-emptive right, it means that the selling shareholder is obliged to first offer their share for purchase to designated persons, usually the other shareholders. Only if these entitled persons do not exercise their preferential right can the share be sold to a third party.

How can a pre-emptive right affect the transfer? Imagine this situation: You have three shareholders in a company, and one of them (Mr. Novák) wants to sell his 20% share to an investor outside the company. If the articles of association contain a provision on a pre-emptive right for the remaining shareholders, Mr. Novák must first offer this 20% to them under the same conditions he negotiated with the investor.

Only if the other shareholders do not show interest within the given period (or refuse the offer) can he sell his share to the investor. Overlooking a pre-emptive right can have serious consequences – the entitled shareholders can claim the transfer is invalid or seek damages for the breach of the pre-emptive right agreement. In practice, this can significantly delay or thwart the entire sale process.

A final piece of advice: Always carefully read your company's articles of association to see if they contain a pre-emptive right, and strictly follow the prescribed procedure for offering the share to the entitled persons. This will prevent disputes and unpleasant surprises.

Approval of the General Meeting: When Is It Needed and What Are the Risks of Omitting It?

Another possible restriction on the transfer of a business share is the need for approval of the transfer by the company's General Meeting. Here, it depends on who the share is being transferred to and what the law or your articles of association stipulate.

• Transfer of a share to an existing shareholder: According to the current legislation (Section 207 of the Business Corporations Act), any shareholder can transfer their share to another existing shareholder freely, without further conditions, unless the articles of association state otherwise. This means that by law, it is not necessary to ask the General Meeting for approval when shareholders transfer shares among themselves, unless your articles of association restrict this freedom.

• Transfer of a share to a third party (outside the circle of shareholders): Here the situation is the opposite. The law (Section 208 of the Business Corporations Act) states that the transfer of a share to a person who is not a shareholder is possible only with the consent of the General Meeting, unless the articles of association provide otherwise. The default rule is therefore: the sale of a share to an external party must be approved by the General Meeting (the supreme body of an s.r.o., i.e., the assembly of all shareholders). However, the articles of association can mitigate or exclude this legal obligation, i.e., allow transfers to third parties even without the consent of the General Meeting. Modern articles of association often give shareholders more freedom, but if your articles do not waive the consent requirement, you must obtain it.
  

What happens if you do not obtain the consent of the General Meeting, even though it is required? In such a case, the transfer of the share is not effective – the transfer agreement may be signed, but it will not become effective until the General Meeting grants its consent. In practice, this means that the new acquirer does not become a shareholder until approval is granted, and if consent is never given, the entire transfer is cancelled.

The law even states that if consent is not granted within 6 months of the conclusion of the agreement, the effects are the same as withdrawal from the agreement – meaning the transfer is cancelled as if it never happened. For the selling shareholder, there is also a protective measure: if the company's body (e.g., the General Meeting) unreasonably refuses to give consent or does not decide on it at all, the affected shareholder has the right to withdraw from the company within 1 month from the termination of the agreement. However, this is a last resort and not something to aim for – it is better not to underestimate the need for consent.

A practical example: Shareholder Mr. Novák (owning 50% in Alfa s.r.o.) decides to sell his share to his friend, Mr. Křížek, who is not yet in the company. The articles of association of Alfa s.r.o. state that a transfer to a third party is possible only with the consent of the General Meeting. However, Mr. Novák rushes the transaction and concludes the purchase agreement without any approval from the General Meeting.

In such a situation, the agreement is up in the air – it is not effective towards the company. If the General Meeting (i.e., Mr. Novák and the remaining shareholders) does not subsequently give its consent, the transfer falls through, and Mr. Křížek will not become a shareholder. Moreover, this will cause unnecessary delays and complications with the return of the purchase price, etc.

Lesson learned: Before you sign a transfer agreement, always check whether you need the consent of the General Meeting (or another body, such as the supervisory board, if required by the articles of association). If so, ideally secure it in advance or include a condition precedent in the agreement stating that the transfer will become effective only after approval by the General Meeting. Approval is usually given in the form of a resolution of the General Meeting (recorded in the minutes, sometimes with a notarial deed if required by law).

The condition precedent brings us to one thing that is often a source of misunderstanding: the signing of the agreement and the actual transfer do not have to occur on the same day. For simple transfers, both may happen at once. For larger transactions, however, the signing happens first, and only after agreed conditions are met—approval from the General Meeting, consent from a bank or regulator, securing financing—does the actual transfer and payment of the price (closing) occur. The period in between is called the interim period and can last for weeks or months.

For the seller, this has a practical implication: until the closing, you still manage the company, but you are no longer its sole master—the purchase agreement usually dictates how you must handle the company during this period and what you are not allowed to change. We discuss how to manage this period without a dispute over the price in the article [LINK 5 →] the period between signing and closing.

Agreement with Officially Verified Signatures: A Formality That Cannot Be Overlooked

A business share transfer agreement is a special type of purchase agreement by which the seller (transferor) transfers their share to the buyer (transferee). The law requires this agreement to be in writing and the signatures of both parties to be officially verified. Official verification of signatures means that the signature of both the seller and the buyer must be verified by, for example, a notary, at a CzechPOINT office, or a municipal office – a simple signature is not sufficient. This ensures the authenticity of the signatures and prevents fraud. Without verified signatures, the agreement is invalid, and the transfer would not be effective.

In addition to the form, it is important to remember the effects of the agreement towards the company. The transfer of a share is effective towards the company only upon delivery of one copy of the agreement to the company (to the executive director). In other words, even if you have a signed agreement, the company "doesn't know" about the new shareholder until it officially receives the news. Therefore, it is recommended that the company's executive director confirms receipt of the agreement in writing on one copy (their signature does not need to be officially verified). This gives you proof that the company has been informed and must respect the new shareholder as a member of the company from that moment on.

What should such an agreement contain? The basic requirements are the identification of the seller, the buyer, and the company, the specification of the transferred share, possibly the amount of the contribution and the business share (%), and the agreement on the transfer (whether for a consideration or free of charge). It is recommended to include a declaration by the seller that they are the sole owner of the share and that the share is not encumbered by anything (e.g., a lien or the aforementioned pre-emptive right).

These declarations protect the buyer from purchasing a "problematic" share. Also, pay attention to spousal signatures: if you are transferring a share that is part of the joint property of spouses (e.g., acquired during the marriage), the consent of the spouse is also required for the transfer – this is often forgotten and can invalidate the transfer.

That this is not a mere formality is confirmed by the case law of the Supreme Court — we discuss the consequences of defective signature verification in detail in the article verification of signatures on a share transfer agreement. We analyze how to precisely formulate the seller's representations and warranties to make them enforceable in the text seller's representations and warranties.

Summary: Always make the share transfer agreement in writing and ensure the signatures are verified. After signing, deliver one copy to the company (to the executive director) and have them confirm its receipt. Without these formalities, the transfer will not be effective.

What Is Transferred with the Share: Contracts and Employees

The transfer of a share does not formally change the contracting party. The company remains the same legal entity, only its owner changes, and existing contracts—lease, supply, loan agreements—therefore usually remain in effect without the need to transfer or renegotiate them. This is one of the practical advantages of this form of transaction.

However, there is a trap that can be easily overlooked. Key contracts often contain a change of control clause, which reacts to a change in ownership—it requires the consent of the other party or even gives them the right to terminate the contract. You will typically find it in contracts with major tenants, energy suppliers, banks, or for software licenses. If you discover such a clause only after the transfer, you might wake up to a situation where the new owner has lost a key customer or financing. Therefore, material contracts are reviewed before signing, and the necessary consents are secured in advance.

With employees, the situation is, on the contrary, simpler than people fear. When a share is transferred, the legal personality of the employer does not change—the company remains the same, only its owner changes. Therefore, there is no transfer of rights and obligations from employment relationships to a new employer, as is the case with an asset deal. Employment contracts, internal policies, and any collective agreements continue, and employees do not need to be formally notified of the change in ownership by any legal notice.

But this does not mean that the employment aspect is without risk. Along with the share, the buyer takes over all existing employment liabilities—unresolved disputes, claims from invalid dismissals, unused vacation, wage liabilities, or non-compete clauses that no one has updated. It is precisely these findings that are often used as leverage on the price in a share transfer. We cover the personnel aspect of due diligence in the article personnel due diligence.

Registering the Change of Shareholder in the Commercial Register: How to Do It and How Much It Costs

Your obligations do not end with the signing of the agreement and any approval by the General Meeting. Every change in the person of a shareholder of an s.r.o. must be registered in the Commercial Register to be publicly visible and official. The company (its statutory body) is primarily responsible for making this change, but the acquirer of the share can also initiate it. Overlooking the registration would be a mistake – an outdated owner would be listed in the register, which could cause complications, for example, when dealing with banks or business partners (who check the data in the register).

How is the registration done? It is necessary to file a proposal for the registration of changes in the Commercial Register with the locally competent registration court (typically the regional court according to the company's registered office). Today, this is done on a standardized form that you can find online on the website of the Ministry of Justice (e-justice, or.justice.cz). The form can be filled out and submitted electronically (which is the fastest option) or in paper form.

Attachments are enclosed with the proposal – mainly the share transfer agreement (with verified signatures) and, if applicable, proof of approval by the General Meeting or a declaration by the new shareholder consenting to their registration in the Commercial Register, etc. The court must receive all attachments in the original or an officially certified copy. For electronic submission, it is therefore necessary to either electronically sign the documents or have them so-called authoritatively converted from paper to electronic form (which can be done at a CzechPOINT office).

How much does it cost to register a change of shareholder in the Commercial Register? The court fee is 2,000 CZK. As of January 1, 2025, court fees can no longer be paid with revenue stamps — the stamps have been abolished. The fee is paid by bank transfer to the account of the relevant court, or by card or in cash at the court's cashier. Note: If the registration is carried out directly by a notary, the fee is 1,000 CZK, because notaries have the option to make a direct entry into the register. However, you would then pay the notary's fee for the notarial deed, so it is a matter of consideration which is more advantageous.

Tip: After submitting the proposal, the court usually registers the change within a few working days. Then check on justice.cz (in the public register) that the new shareholder is registered and everything is in order. This completes the entire transfer process.

Transfer of a Share Between Existing Shareholders: Specifics and the Risk of a Shift in Influence

If you are transferring a share between current shareholders of the company, the whole process is administratively simpler (you usually do not need a General Meeting, unless the articles of association require it). However, beware of one specific feature: shares in the hands of one shareholder are cumulative, which can significantly change the balance of power in the company. If one shareholder buys the share of another, they gain greater voting power and influence. A minority co-owner can become a majority owner, or even the sole shareholder.

Example: There are three shareholders in a company – Mr. A (has a 50% share), Mr. B (30%), and Mr. C (20%). Mr. B decides to leave and sells his 30% to Mr. A. Mr. A thus increases his share from 50% to 80%. A company where no single individual previously had complete control suddenly becomes a company controlled by one shareholder (Mr. A has 80% of the votes, easily pushing through most decisions).

For Mr. C, this means that his influence (20%) is now negligible compared to Mr. A's new 80%. If such a change were undesirable, the shareholders had the option to address it in advance in the articles of association – for example, by limiting the maximum voting rights of one shareholder, or by stipulating an obligation to offer the share to the third shareholder first, etc. However, if the articles of association do not provide for anything like this, the buyer acquires the full scope of rights associated with the newly acquired shares, which are simply added to their existing ones.

In summary: When transferring between existing shareholders, do not forget to consider how the transaction will affect your percentages and voting rights. The shares in the hands of the acquirer will be combined, and their weight in the company will increase in proportion to the acquired share. To avoid unwanted surprises, think through these consequences in advance and, if necessary, consult a lawyer on how to address them contractually.

Family Transfers and Succession Planning

A special category are transfers within the family—to a spouse, to children, or as part of a generational change. Legally, it is the same act as a sale to a third party: a written agreement with officially verified signatures, possible consent of the General Meeting, and registration in the register. The difference lies in what is addressed besides the agreement.

In a family transfer, the goal is usually to pass on the company, not to monetize it, and this leads to different questions. Is the share transferred for consideration, or as a gift—and what are the tax implications? Should one child get it, or all of them equally? What if only one of them is to manage the company? Who will be the executive director and from when? The share transfer agreement itself does not answer these questions; they are addressed in the articles of association, or through a holding or fund structure. A transfer free of charge also has its own tax regime, which differs from a sale.

Practical advice from the transactions we see: a generational handover cannot be done at the last minute. If there are more heirs in the company than those who want to work in it, you need to separate ownership from management—and that is work for months, not for a single agreement. We discuss the specifics of transferring to a wife or children in the article transfer of a share to a wife or children; we analyze generational handover in a family business in the text transfer of a business share in a family company.

How Much Does a Share Cost and How Is the Price Determined?

So far, we have talked about how to carry out the transfer. The question that we get most often remains: for how much. The answer depends on who you are transferring the share to.

For a transfer between shareholders or within a family, the price is usually agreed upon, or symbolic. But be careful that a price significantly lower than the market price can have tax consequences, and in the case of a transfer between related parties, the tax authority can recalculate it.

For a sale to an external buyer, the price is, on the contrary, derived from the value of the company and is usually determined as a combination of valuation and negotiation—and it almost never stays at a single number. Purchase agreements in larger transactions contain mechanisms that adjust the price after signing according to the actual state of the company on the date of transfer.

We cover how the final price is determined and how it can be changed after signing in the text how the final purchase price is determined. The option where part of the price depends on the future results of the company is discussed in the article earn-out and payment based on future results.

The Tax Aspect of the Transfer: The Ownership Test and Changes from 2026

The tax aspect is often what determines the final amount in your bank account when transferring a share. For a natural person, the so-called ownership test is key: if you have held a share in a business corporation for more than five years, the income from its transfer is exempt from income tax. For securities, this period is three years.

The rules have changed twice in the last two years, so it's worth knowing where we are now. From January 1, 2025, even if the ownership test was met, an annual cap of 40 million CZK applied to the total of exempt income from the sale of shares and securities; anything above that was taxed proportionally. From January 1, 2026, this cap for business shares and stocks was abolished—so if the ownership test is met, the income is exempt regardless of its amount, just as it was before 2025. The 40 million CZK cap still applies to crypto-assets.

For planning a sale, this has one practical implication: the decisive moment is not the signing of the agreement, but the moment you actually receive the money. For transactions that span the end of the year, or for a price paid in installments, this can make a crucial difference. We discuss the current situation and upcoming changes in the article how income from the sale of a share is taxed, and the changes effective from 2026 in the text changes in the taxation of share transfers from 2026.

Do Not Underestimate Preparation and Seek Professional Help 

The transfer of a business share in an s.r.o. may at first glance seem like a purely formal matter, but as we have shown, it hides many details that can determine the success or invalidity of the entire transfer. The key is thorough preparation: choosing the right transaction, studying the articles of association (for pre-emptive rights or the need for corporate body approval), a correctly drafted agreement with verified signatures, timely approval by the General Meeting if necessary, and subsequent completion of administrative tasks such as registration in the Commercial Register.

Do not forget other related aspects – for example, the tax implications of the share sale or the need for a spouse's consent. Typical mistakes include rushing and underestimating formalities: just forgetting one signature verification or omitting the General Meeting's consent can prolong or invalidate the entire process. The good news is that you don't have to go it alone. If you are unsure or want to have everything legally in order, turn to professionals.

The ARROWS law firm has extensive experience with transfers of business shares and regularly helps entrepreneurs successfully manage the entire transfer process. Our experienced Prague-based lawyers will have your back – they will prepare or review the agreement, oversee all legal obligations and deadlines, and advise on the optimal setup of the transfer to match your business goals. Do not hesitate to contact us – together we will ensure that the transfer of your share proceeds quickly, smoothly, and safely for all parties involved.