The share transaction, like the asset/liability transaction, is a way to realize a business acquisition.
In the case of a sole proprietorship or general partnership (V.O.F.), this way is out of the question, but it is possible for a limited liability company (B.V.). This is because this organization has shares that can be transferred.
What is a share transaction?
A share transaction differs from the asset/liability transaction in several ways. The sale of shares can be complete or in parts, but it is important to note that the complete assets of the company count. This includes the assets, all debts and the complete activities of the business. The personnel are also fully included in the transfer.
How does the share sale work?
Often all shares are sold, but it can also happen that only part of the shares go into the sale. The new owner then becomes a shareholder or co-shareholder, in the latter case joining with other stockholders to manage the company.
However, there are legal rules that ensure that shares cannot be taken over by just anyone. If only one of the company's shareholders wants to sell its share, in most cases a blocking arrangement comes into play. This arrangement limits the free transfer of shares by requiring the offeror to first check with the other shareholders to see if they are interested. It may also stipulate that he has to ask his fellow shareholders for approval before selling part of the company.
If the entire entity is going to be sold or the co-shareholders have agreed with each other that one of the holders may sell his shares, a notary will be involved. A share transaction cannot take place without a notary, since the shares are delivered by notarial deed.
Advantages and disadvantages of the share transaction
Advantages
- All rights and obligations are transferred to the new (co-)owner at once;
- Exemption from transfer tax, if <70% of the balance sheet total concerns registered property.
Disadvantages
- All property is transferred to the new shareholder, including any (hidden) debts;
- Contract acquisition is necessary, but can cause considerable problems if contracting parties do not cooperate;
- Staff is taken over by necessity, even if this is not your preference;
- Permits are not always transferable, so as a buyer you have to restart administrative processes.
What about contracts and personnel?
A share transaction has several advantages over an asset-passiva transaction, the content of which is quite clear. Namely, as a buyer, this way you are assured that you take over contracts, licenses and personnel, without exceptions.
However, it is recommended to have the agreement reviewed by specialists as well as to hire guidance during the acquisition process. Particular attention should be paid to special exceptions to the takeover, such as a change of control clause. This clause gives suppliers or other contracting parties the right to terminate the agreement in the event of changes in management. A due diligence investigation will provide conclusive information, so don't skimp on this.
For companies, an equity transaction is an option to sell your business. The alternative is the asset pass-through transaction, where you have more freedom in which properties you take over. With a stock transaction, you have more certainty, but also significantly more investigative duties and potential complications.
