Share Deal vs. Asset Deal: Which Structure to Choose for a Company Sale?

Three Forms of Sale That Are Often Confused in Practice

A share deal is more advantageous for the seller in terms of the so-called holding period test. If they hold the interest for longer than the period stipulated by law, their income is tax-exempt. For company sales, it is also the market standard for sales, which buyers, banks, and their advisors are accustomed to.

In contrast, buyers often prefer an asset deal. This way, they do not have to deal with the company's history and also gain a so-called tax shield, as the price of the purchased assets is treated as a cost. When a share deal is being negotiated and the buyer wants to address costs, they should always be interested in the so-called residual value of the assets within the company. This determines how much of the assets still remains to be depreciated.

However, an asset deal is not always a sale of an enterprise; more often, it is not. It is a sale of assets: typically real estate, production machinery and technology, inventory, or selected know-how. The buyer selects individual items, and each is transferred under its own legal title—for real estate, by registration in the Land Registry.

In contrast, the sale of an enterprise is a separate form with its own legal regime: the enterprise is transferred as an aggregate asset in a single legal act, including debts and employees. We discuss its specifics in a separate article on the transfer of an enterprise and its legal pitfalls.

In addition to these three forms, others exist, such as a management buyout, where the company is purchased by its own management. We will discuss those at another time. The difference between a share deal and an asset deal was also covered in a separate chapter by ARROWS' managing partner Jakub Dohnal in his book How to Sell a Company with Real Estate.

What Is Being Sold: An Interest, Individual Assets, or an Entire Enterprise

A share deal is the transfer of an interest in a company. The buyer acquires an interest in a limited liability company or shares, i.e., ownership of the legal entity as such. The company itself does not change: it retains all its contracts, licenses, employees, assets, debts, and closed tax periods.

An asset deal, on the other hand, does not target the company or the enterprise as a whole, but specific assets. The buyer selects real estate, production machinery, technology, inventory, or intellectual property rights, and acquires each item through a separate transfer. The selling company continues to exist, and its debts, disputes, and tax history remain with it.

The sale of an enterprise, in contrast, is the transfer of an organized set of assets and liabilities that an entrepreneur has created and which serves the operation of their business. According to Section 2175 of the Czech Civil Code, by purchasing an enterprise, the buyer acquires everything that belongs to the enterprise as a whole, even if the parties exclude an individual item from the purchase, provided the whole does not lose its character as an enterprise.

The Supreme Court has interpreted an enterprise as a special case of an aggregate asset, which generally includes all assets and debts related to the operation of the business. The transfer of an enterprise in a single legal act is therefore a special legal title for the transfer of the individual items within the enterprise, and no further transfer titles are needed unless the law provides otherwise. This interpretation was formulated in its judgment Ref. No. 29 ICdo 92/2020 and confirmed in the judgment Ref. No. 26 Cdo 105/2025.

The practical difference is therefore fundamental: in a share deal, you also buy the company's past; in an asset deal, only selected assets; and in the sale of an enterprise, a functional operation to which the law also attaches a portion of the debts. This single sentence is behind most negotiations about the transaction structure, as it determines who will bear the consequences of issues that emerge after signing.

Debts and Liability: Where the Two Variants Diverge Most

In a share deal, no transfer of debts occurs. The debts remain where they were, i.e., in the sold company, and the buyer bears them economically through the value of their new interest. Their protection is not statutory rules, but the seller's representations and warranties, indemnification clauses, and securing the price with a holdback or an escrow account.

We discuss separately how to formulate representations and warranties to be enforceable and where the line is drawn between a warranty and an indemnity.

The law only considers one situation: according to Section 209(1) of the Czech Business Corporations Act, the transferor of a company is liable for the debts that were transferred with the interest to the acquirer. Typically, this involves an unpaid contribution obligation. This liability does not apply to the commercial debts of the company itself.

In the sale of an enterprise, the logic is the opposite. In the sale of individual assets, on the other hand, no debts are transferred to the buyer, as only assets are being transferred. According to Section 2177(1) of the Czech Civil Code, the buyer becomes the creditor of the receivables and the debtor of the debts belonging to the enterprise, but they only assume those debts whose existence they knew of or must have reasonably anticipated. If a creditor has not consented to the buyer's assumption of the debt, the seller is liable for its fulfillment.

The Supreme Court, in its judgment Ref. No. 26 Cdo 105/2025, concluded that such debts are transferred to the buyer even if they are not identified in the contract. It considered debts belonging to the enterprise to be those whose origin is caused by the operation of the enterprise and which are closely related to the costs of ensuring its operation and development. The decisive factor is the substantive and temporal connection with the operation, not the legal title from which the debt arose.

A list of debts in an annex to the contract is therefore not, in itself, a protection for the buyer. The protection lies in proper legal and financial due diligence, an honest definition of the subject of the transfer, and a contractual allocation of risk for what the due diligence does not uncover.

We describe the scope of such due diligence, its process, and typical findings that will lower the price in the article on legal and financial due diligence before an acquisition.

The seller's creditors also enter the equation: according to Section 2181 of the Czech Civil Code, a creditor who did not consent to the sale may seek a court declaration that the sale of the enterprise is ineffective against them if the sale impairs the recoverability of their claim. This right expires if not exercised within one month from the day the creditor learned of the sale, but no later than three years from the effective date of the contract. Furthermore, the seller must, without undue delay, notify their creditors and debtors that they have sold the enterprise and to whom.

When the Transaction Reverses: Seller's Insolvency and Withdrawal from the Contract

Ineffectiveness under Section 2181 of the Czech Civil Code is not the only way a sale of an enterprise can fall apart. If the seller ends up in insolvency, a separate and significantly more dangerous regime of ineffectiveness under the Czech Insolvency Act comes into play. This is not about ineffectiveness against a single creditor, but about the obligation to surrender the acquired performance to the insolvency estate.

According to Section 239(1) of the Czech Insolvency Act, only the insolvency administrator can bring an action for avoidance, and they must do so within one year from the date the decision on bankruptcy became effective; if they fail to do so, the right to avoidance expires. The debtor's performance becomes part of the insolvency estate upon the final and binding decision upholding the action for avoidance, and an action for exclusion against this is not admissible.

The crucial factor is the look-back periods. A legal act without adequate consideration and a preferential act can be challenged if made in the last three years before the commencement of insolvency proceedings in favor of a related party or a person forming a concern with the debtor, or within one year in favor of another person. For an intentionally detrimental act, the period under Section 242(3) of the Czech Insolvency Act is five years.

For the buyer, this means one thing: the purchase price for the enterprise must be defensible as a fair market price and must be demonstrable, ideally through an independent valuation. For intra-group transfers of an enterprise, it is necessary to monitor the three-year, and for intentional detriment, up to a five-year history, because for related parties and group companies, both insolvency and knowledge of it are presumed. It is no coincidence that both key Supreme Court decisions on the sale of an enterprise, Ref. No. 29 ICdo 92/2020 and Ref. No. 26 Cdo 105/2025, arose precisely from insolvency disputes.

Withdrawal from the contract also has its own regime. According to Section 2182 of the Czech Civil Code, the receivables and debts belonging to the enterprise revert to the seller, but of the debts, the seller only reacquires those whose existence they knew of or must have reasonably anticipated. If a creditor has not consented to the seller's re-assumption of the debt, the buyer is liable for its fulfillment. The buyer must also, without undue delay, notify the creditors and debtors that the obligation has been terminated by withdrawal from the contract.

Withdrawal is therefore not a return to the initial state, but a new transfer with the same logic and the same risks, just in the opposite direction. This is precisely why, in negotiated transactions, withdrawal is usually excluded for later stages and replaced by a price reduction or indemnification.

Taxes: This Is Where the Net Price Is Decided

For a natural person, a share deal is usually the most tax-favorable route. Income from the transfer of an interest in a business corporation for consideration is, according to Section 4(1)(q) of the Czech Income Tax Act, exempt if the period between acquisition and transfer exceeds five years. For securities, typically shares, the test is three years under Section 4(1)(u), while for a private deed of transfer (kmenový list), it is five years.

A major new development is the abolition of the value cap: Act No. 360/2025 Coll. removed the CZK 40,000,000 limit, which was first applied in 2025, for interests and securities as of January 1, 2026, leaving it in Section 4(3) of the Income Tax Act only for crypto-assets. For business owners, this means a return to full exemption upon meeting the holding period test and significantly simpler planning for larger transactions. However, for income received by the taxpayer in 2025, the rules from that time still apply, which is important for purchase prices paid in installments across the turn of the year.

A detailed analysis of the taxation of income from the transfer of an interest, including the acquisition price, the impact of transformations on the holding period test, and the difference between an interest and a security, can be found in a separate article.

If the seller is a legal entity, an exemption under Section 19(1)(ze)(2) of the Czech Income Tax Act is available. The condition is a parent-subsidiary relationship, i.e., an interest of at least 10% in the share capital held continuously for at least twelve months, with the time condition being fulfillable retroactively. Without the exemption, the profit from the sale is taxed at the standard corporate income tax rate.

The sale of assets and the sale of an enterprise have a different tax trajectory: the profit is taxed at the level of the selling company, and the money reaches the owner only through a profit distribution, which is subject to further taxation. It is this double taxation that is often the reason why the selling party pushes for a share deal, even when the buyer prefers a clean enterprise. The difference in the net amount for the owner in larger transactions is often in the tens of percent.

From a value-added tax perspective, the two asset-based forms diverge. According to Section 13(7)(a) of the Czech Value Added Tax Act, the disposal of an enterprise is not considered a supply of goods, so the sale of an enterprise is outside the scope of VAT.

However, if you are selling individual assets, i.e., a classic asset deal, it is not a disposal of an enterprise, and the individual supplies may be subject to value-added tax. For real estate, a separate exemption regime and the option to elect for taxation also apply, so the resulting burden depends on the type of property and to whom it is sold.

The buyer, on the other hand, has a significant advantage in an asset deal, as they revalue the acquired assets to the purchase price and depreciate them from new entry prices. This is what is known in practice as a tax shield: the price of the purchased assets is gradually returned to the buyer in the form of costs. In a share deal, the acquired company continues to depreciate from the original values, and the purchase price of the interest is not depreciated at all. That is why a buyer in a share deal should always be interested in the residual value of the assets in the company, i.e., how much of them is left to be depreciated. This difference in depreciation position is usually the buyer's strongest argument for an asset deal and should be on the table during price negotiations, not just when accounting for the transaction.

Employees: You Have No Choice in an Enterprise Sale

The purchase of an enterprise is, according to Section 2175(2) of the Czech Civil Code, considered a transfer of the employer's activities. This activates Section 338(2) of the Czech Labour Code, under which the rights and obligations from employment relationships are transferred to the acquiring employer in their entirety. The rights and obligations from a collective bargaining agreement are transferred for the duration of its validity, but no longer than until the end of the following calendar year.

The Supreme Court, in its resolution Ref. No. 21 Cdo 1706/2023, confirmed that the decisive factor is the employee's actual assignment to the transferred enterprise or its part, and not whether the contract's content provides for them. In the case under review, an employee who was not listed in the annex with the list of transferred employees was also transferred to the buyer. The court also stated that the seller's and buyer's ideas about the scope of the transferring employees are not relevant here and that the employees' consent is not required.

This includes an information duty. According to Section 339 of the Czech Labour Code, the current and acquiring employers must, no later than 30 days before the transfer, inform the trade union and the works council and consult with them on the date and reasons for the transfer, its legal, economic, and social consequences, and the planned measures. If neither of these bodies operates at the employer, it informs the affected employees directly within the same period.

We discuss how the transfer practically proceeds from the employees' perspective and what all is transferred to the new employer in the article about what happens when a business or division is transferred.

In the sale of individual assets, employees are not automatically transferred because it is not an activity but assets that are being transferred. But beware of the boundary: if a coherent operational unit is de facto transferred along with the assets, it may still be considered a transfer of the employer's activities.

In a share deal, the employer does not change, no transfer takes place, and the thirty-day period does not apply. However, this does not mean that the personnel side is without risk: management contracts, incentive programs, and non-disclosure agreements often contain change of control clauses that are triggered precisely by the sale of an interest. The lawyers from the ARROWS law firm review these clauses as part of labor law due diligence before signing, to prevent key people from becoming the most expensive item of the transaction.

Consents and Form: What Can Block the Transaction

The sale of an enterprise is not a decision for the executive director. According to Section 190(2)(i) of the Czech Business Corporations Act, the approval of the transfer or pledge of an enterprise or such part of the assets that would mean a substantial change in the actual object of the business or activity of the company falls within the competence of the General Meeting. A similar rule applies to a joint-stock company.

A share deal also has its formal rules: according to Section 209(2) of the Czech Business Corporations Act, a contract for the transfer of an interest must be in writing with officially certified signatures and is effective towards the company upon its delivery. Unless the articles of association provide otherwise, a transfer to a person who is not a shareholder requires the consent of the General Meeting under Section 208; if it is not granted within six months of the conclusion of the contract, the same effects as a withdrawal from the contract occur.

We discuss the individual steps, including deadlines, fees for registration in the Commercial Register, and the most common mistakes, in a separate guide on how to transfer an interest in an LLC.

In both the sale of an enterprise and the sale of individual assets, the biggest source of unpleasant surprises is what does not transfer automatically with the assets. Public-law permits, licenses, concessions, drawn subsidies, and many lease relationships require separate handling or the consent of the other party. Moreover, according to Section 2178 of the Czech Civil Code, a right from industrial or other intellectual property cannot be transferred by the sale of an enterprise if this is excluded by the contract under which the right was granted to the seller, or by the nature of such a right.

This is precisely why a so-called consent map is always created for both asset-based forms, i.e., a list of all third parties whose statement is a condition for completing the transaction. In a share deal, this list is usually shorter, but not empty: change of control clauses are often found in bank loans, lease agreements, framework agreements with key customers, and subsidy conditions. Underestimating this step means a delay at best, and a breach of contract and acceleration of financing at worst.

Regulatory Filters: Antitrust Clearance and Foreign Investments

Both variants may fall under the mandatory clearance for a concentration of undertakings. According to Section 13 of the Czech Act on the Protection of Competition, clearance is necessary if the total net turnover of all merging undertakings in the Czech Republic exceeds CZK 1.5 billion and at least two of them each achieved a turnover of more than CZK 250 million, or if the turnover of the acquired undertaking or its part exceeds CZK 1.5 billion and the worldwide turnover of another merging undertaking also exceeds CZK 1.5 billion.

Neither an asset sale nor an enterprise sale can avoid this obligation: according to Section 12(3) of the same Act, a part of an undertaking is also understood to be a set of assets to which turnover achieved on the relevant market can be clearly attributed, even if it does not form a separate branch of the enterprise. Implementing a concentration before clearance is issued is a separate violation with its own penalty, which has a practical impact on when the buyer can actually start managing the enterprise.

If an investor from outside the European Union is involved in the transaction, screening under Act No. 34/2021 Coll., on the Screening of Foreign Investments, is added. In sensitive sectors, the investment may be subject to approval; elsewhere, a consultation may suffice, but it is always necessary to allow for additional time. Thanks to the ARROWS International network, the ARROWS law firm also handles transactions with multiple jurisdictions, where the client deals with one main partner and we coordinate the local advisors for them.

When the Transfer Becomes Effective and Who Bears the Risk at That Moment

In a share deal, the contract for the transfer of an interest is effective towards the company upon delivery of the effective contract. The registration of the new shareholder in the Commercial Register is declaratory in nature; the acquisition of the interest does not depend on it. This is precisely why contracts carefully separate the signing from the fulfillment of conditions and from the payment of the price.

A special rule applies to the sale of an enterprise: if the buyer is registered in a public register, according to Section 2180(1) of the Czech Civil Code, they acquire ownership of the enterprise as a whole only upon the publication of the fact that they have deposited the document on the purchase of the enterprise in the Collection of Deeds. If the buyer is not registered in a register, they acquire ownership upon the contract becoming effective. However, this does not affect the obligations to register rights to individual items under other regulations, so for real estate, one still has to wait for registration in the Land Registry. In the sale of individual assets, on the other hand, no summary moment applies, and ownership is acquired for each item separately—for real estate by registration in the Land Registry and for movable property usually by handover.

The record of handover of the enterprise under Section 2179 of the Czech Civil Code plays a significant role. In it, the parties list everything the enterprise includes and what is being handed over, as well as everything that is missing, although according to the contract or accounting records it co-creates the enterprise. The seller must, at the latest here, point out any defects they know of or should and could have known of.

This record is therefore much more than a formality: it is the main evidence of the condition in which the enterprise was handed over and is decisive for later claims for defects. In real estate and development transactions, the time lag between signing, depositing the document in the Collection of Deeds, and registration in the Land Registry must be covered by an agreement on the transfer of risk, management of property, and insurance. The lawyers from the ARROWS law firm in the field of real estate law and development and construction law can help you with setting up the entire process and documentation.

How to Decide: A Practical Approach

The choice between these forms is not a matter of taste, but the result of several specific findings. We recommend the following procedure:

• Find out who is on the seller's side and how long they have held the interest – for a natural person after meeting the holding period test and for a parent company with an exemption, a share deal is clearly more advantageous.

• Map the company's history and the risks that will remain in it – lawsuits, tax audits, environmental liabilities, and responsibility for past actions are the buyer's main arguments for an asset deal.

• Check the seller's financial health and the history of intra-group transfers – if the seller is at risk of insolvency, the administrator can challenge the sale of the enterprise with an action for avoidance, and the buyer will lose it.

• Assess the buyer's depreciation position and the residual value of the assets in the company – the ability to revalue assets and depreciate from new entry prices has significant value in capital-intensive operations.

• Compile a list of permits, licenses, and subsidies – the more public-law titles the operation needs, the stronger the argument for transferring an interest in a project company.

• Review change of control clauses and necessary consents – banks, leasing companies, and key customers determine the timeline just as much as authorities do.

• Test the turnover thresholds and the need for regulatory approvals – antitrust clearance and foreign investment screening belong in the timeline from the beginning, not at its end.

Final Summary

A share deal and an asset deal are not two paths to the same result. A share deal is simpler to execute, usually more tax-favorable for the seller thanks to the holding period test, and gentler on permits and contracts, but it transfers the entire history of the company to the buyer. An asset deal gives the buyer a cleaner position and a tax shield from revalued assets, at the cost of having to transfer each item separately and deal with value-added tax. The sale of an entire enterprise stands between them: it is transferred in a single legal act, but the law attaches debts and employees to it.

The decision should therefore not be made at the end of negotiations, but at the beginning, because it affects the price, timeline, necessary consents, and who will bear the consequences of due diligence findings. Once the term sheet is signed, changing the transaction structure is difficult and usually comes at the cost of concessions elsewhere.

The sale of a company whose substantial value lies in real estate has its own rules — from the choice of transaction form to the handling of lease relationships. ARROWS' managing partner Jakub Dohnal dedicated an entire book to them, How to Sell a Company with Real Estate, in which he draws on transactions worth hundreds of millions of crowns.

For owners, management, and investors, the practical conclusion is simple: the form of sale is a business decision with legal and tax consequences that need to be calculated, not estimated. If you do not want to risk unnecessary taxation, disputes with creditors, or blocked financing, the ARROWS law firm can take over the entire transaction from structure to signing, being insured for professional liability with a limit of CZK 350,000,000. Write to consultation@arws.cz and we will discuss which option is better suited for your case.