Share Deal vs. Asset Deal: Which Form of Business Sale to Choose?

What is being sold: a share in a company, or a business enterprise

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

An asset deal, on the other hand, is not aimed at the company, but at the business enterprise as an organised set of assets that the entrepreneur has created and which serves to operate their business. The selling company continues to exist, but the business operations are transferred out of it. Under Section 2175 of the Czech Civil Code, by purchasing the 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 a business enterprise as a special case of a collective item, which in principle includes all assets and debts related to the operation of the business. The transfer of an enterprise through 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 judgment ref. no. 29 ICdo 92/2020 and confirmed in 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, you buy the operation without its legal history. This single sentence is behind most negotiations on the transaction structure, as it determines who will bear the consequences of issues that emerge after signing.

Debts and liability: where the two options differ 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, indemnity clauses, and securing the price with a retention or 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: under Section 209(1) of the Business Corporations Act, the transferor of the company is liable for the debts that were transferred with the share to the acquirer. This typically involves an unpaid contribution obligation. This liability does not apply to the commercial debts of the company itself.

In an asset deal, the logic is the opposite. Under Section 2177(1) of the Czech Civil Code, the buyer becomes the creditor of receivables and the debtor of liabilities belonging to the enterprise, but they only assume those debts whose existence they knew of or could have reasonably foreseen. If a creditor has not consented to the buyer's assumption of the debt, the seller is liable for its performance.

In its judgment ref. no. 26 Cdo 105/2025, the Supreme Court concluded that such debts transfer to the buyer even if they are not identified in the agreement. It considered debts belonging to the enterprise to be those whose creation 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.

An enumerated list of debts in an appendix to the agreement is therefore not in itself a protection for the buyer. The protection is a 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: under 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 receivable. This right expires if not exercised within one month from the day they learned of the sale, but no later than three years from the effective date of the agreement. In addition, the seller must notify their creditors and debtors without undue delay that they have sold the enterprise and to whom.

When the transaction reverses: seller's insolvency and withdrawal from the agreement

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 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 Insolvency Act, only the insolvency administrator can challenge the act, by filing an avoidance action within one year from the date the decision on bankruptcy took effect; if they fail to do so, the avoidance claim expires. The debtor's performance becomes part of the insolvency estate upon the final and binding decision upholding the avoidance action, and an action for exclusion of assets is not admissible against it.

The decisive factors are 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 favour of a related party or a person forming a concern with the debtor, or within one year in favour of another person. For an intentionally detrimental act, the period under Section 242(3) of the 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 value and must be demonstrable, ideally by 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 bankruptcy and knowledge of it are presumed. It is no coincidence that both key Supreme Court decisions on the business enterprise, ref. no. 29 ICdo 92/2020 and ref. no. 26 Cdo 105/2025, arose precisely from insolvency disputes.

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

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 withdrawal is usually excluded for later stages in negotiated transactions and replaced by a price reduction or indemnity.

Taxes: this is where the net price is decided

For an individual, a share deal is usually the most tax-favourable route. Income from the transfer of a share in a business corporation is exempt under Section 4(1)(q) of the Income Tax Act 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 common certificate (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 shares and securities as of 1 January 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 instalments across the turn of the year.

A detailed analysis of the taxation of income from the transfer of a share, including the acquisition cost, the impact of transformations on the holding period test, and the difference between a share 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 Income Tax Act is available. The condition is a parent-subsidiary relationship, i.e., a share of at least 10% in the registered 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.

An asset deal has a different tax trajectory: the profit from the sale of the enterprise 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 if 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, an asset deal is more advantageous than it might seem. Under Section 13(7)(a) of the VAT Act, the disposal of a business enterprise is not considered a supply of goods, so the transaction is outside the scope of VAT. But beware of the borderline: if you sell selected assets instead of an enterprise, it is no longer a disposal of an enterprise, and the transaction may be subject to tax.

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 acquisition costs. In a share deal, the acquired company continues to depreciate from the original values, and the purchase price of the share is not depreciated at all. This difference in the 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 considered a transfer of the employer's activities under Section 2175(2) of the Czech Civil Code. This activates Section 338(2) of the Labour Code, according to 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 effectiveness, but no longer than until the end of the following calendar year.

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

This includes an information duty. According to Section 339 of the Labour Code, both the current and the acquiring employer must inform the trade union and the works council at least 30 days before the transfer and discuss with them 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 will practically take place from the employees' perspective and what all will transfer to the new employer in the article on what happens when a business or division is transferred.

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 schemes, and non-disclosure agreements often contain change of control clauses that are triggered precisely by the sale of a share. The lawyers at ARROWS law firm review these clauses as part of labour 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 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 Business Corporations Act, a share transfer agreement 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 agreement, the same effects as in the case of withdrawal from the agreement 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 a share in an s.r.o..

In an asset deal, the biggest source of unpleasant surprises is what does not transfer with the enterprise automatically. Public-law permits, licences, concessions, drawn subsidies, and many lease relationships require a separate solution or the consent of the other party. Moreover, under Section 2178 of the Czech Civil Code, the sale of an enterprise cannot transfer industrial or other intellectual property rights 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 an asset deal, i.e., a list of all third parties whose statement is a condition for the completion of the transaction. In a share deal, this list is usually shorter, but not empty: change of control clauses are often found in bank loans, leasing agreements, framework agreements with key customers, and in 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 investment screening

Both options may fall under the mandatory clearance for a merger of competitors. According to Section 13 of the Act on the Protection of Competition, clearance is necessary if the total net turnover of all merging competitors 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 competitor or its part exceeds CZK 1.5 billion and the worldwide turnover of another merging competitor also exceeds CZK 1.5 billion.

An asset deal does not escape this obligation: according to Section 12(3) of the same act, a part of a competitor 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 merger 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 enters 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 account for additional time. Thanks to the ARROWS International network, ARROWS law firm also handles multi-jurisdictional transactions, where the client deals with one main partner and we handle the coordination of local advisors for them.

When the transfer takes effect and who bears the risk at that moment

In a share deal, the share transfer agreement is effective towards the company upon delivery of the effective agreement. The registration of the new shareholder in the commercial register is declaratory in nature; the acquisition of the share does not depend on it. This is precisely why agreements carefully separate the signing from the fulfilment of conditions and the payment of the price.

A special rule applies to an asset deal: 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 effectiveness of the agreement. However, this does not affect the obligations to register rights to individual assets under other regulations, so for real estate, one still has to wait for registration in the Land Registry.

A significant role is played by the protocol on the handover of the enterprise under Section 2179 of the Czech Civil Code. 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 agreement or accounting records it co-creates the enterprise. Here, the seller must, at the latest, point out any defects they know of or should and could have known of.

This protocol 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, there is also the time gap between signing, depositing the document in the Collection of Deeds, and registration in the Land Registry, which must be covered by an agreement on the transfer of risk, management of property, and insurance. The lawyers from 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 procedure

The choice between the two models 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 share – for an individual who has met 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 burdens, and liability 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 avoidance action, and the buyer will lose it.

• Assess the buyer's depreciation position – the ability to revalue assets and depreciate from new acquisition costs has significant value in capital-intensive operations.

• Compile a list of permits, licences, and subsidies – the more public-law titles the operation needs, the stronger the argument for transferring a share 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 in execution, generally more tax-favourable for the seller, 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 better depreciation situation, at the cost of a more complex process, double taxation on the seller's side, and the statutory transfer of employees.

The decision should therefore not be made at the end of the 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 don't want to risk unnecessary taxation, disputes with creditors, or blocked financing, ARROWS law firm can take over the entire transaction from structure to signing. The firm is insured for professional liability with a limit of CZK 400,000,000. Write to us at konzultace@arws.cz and we will discuss which option is better suited for your case.