Selling your company: shares or assets?
How the tax, VAT, staff and liability consequences differ, and why the structure can change what you take home by a large margin.
Tell us the sector and rough size. A principal replies personally, and no company names are needed.
What is the difference between a share sale and an asset sale?
In a share sale, the shareholders sell their shares. The company carries on exactly as it was: same contracts, same licences, same staff, same history. Everything the company owes, known or unknown, goes with it.
In an asset sale, the company sells the business itself, meaning the equipment, stock, customer contracts, brand and so on, and the buyer takes only the assets and the specific liabilities it agrees to assume. The seller’s company stays behind, with the sale proceeds inside it.
How is each taxed for the seller?
Share sale. The gain is normally a capital gain. For an individual, 40% of the gain is added to taxable income, which at the top marginal rate of 45% gives a maximum effective rate of 18%. A company seller includes 80% of the gain, which at the 27% corporate rate is about 21.6%. Individuals also get an annual exclusion (R50,000 a year at the time of writing), and owners of qualifying small businesses may be able to use the lifetime exclusion explained in our guide to the R2.7m small business CGT exclusion. Shares held for at least three years are automatically treated as capital in nature. For shorter holdings, the tax authority looks at intention and behaviour, and a gain treated as revenue can be taxed at up to 45%.
Securities transfer tax of 0.25% also applies when shares are transferred. Your agreement should say who bears it.
Asset sale. The company, not you, is the seller, so the tax is the company’s. Capital assets can give rise to capital gains tax; stock and previously claimed depreciation (“recoupments”) are taxed as ordinary income. Then comes the second layer: to get the money to you, the company has to pay a dividend or distribute on liquidation, which is generally subject to dividends tax at 20% for an individual shareholder, with some exceptions. That is why an asset sale tends to cost the seller more overall.
How big can the difference be?
Here is a deliberately simple illustration, not a forecast. Assume an individual owns 100% of a company, and the sale produces a R10m capital gain either way. All of it is paid out to the shareholder, who is a South African resident.
- Share sale: 40% of R10m is R4m added to income; at 45% that is R1.8m of tax. Effective rate 18%.
- Asset sale, then payout: the company pays 27% on 80% of the gain, which is R2.16m. The remaining R7.84m is paid out and dividends tax of 20% takes R1.568m. Total tax R3.728m. Effective rate about 37%.
The gap here is roughly R1.9m on a R10m gain. Real deals differ: recoupments, assessed losses, tax-neutral reorganisation rules, existing base costs and the shareholder’s own position can all move the answer. The point is only that the structure matters and should be modelled before you negotiate, not after.
What about VAT and transfer duty?
An asset sale is a supply of goods and services and attracts VAT at 15% unless it qualifies as the sale of a going concern, which can be zero-rated. Broadly, that requires a written agreement, both parties to be registered VAT vendors, an income-earning enterprise, and all the assets needed to run it to be sold across. If the conditions are not met, the seller can be left with VAT of 15/115 of the price. Transfer duty can apply to property that is not part of a VAT-able supply. A share sale carries no VAT. Get the documents right: this is one of the most common ways asset sales go wrong.
What happens to my staff?
In a share sale, the employer does not change, so section 197 of the Labour Relations Act is not triggered and the staff continue on the same terms. In an asset sale of a going concern, section 197 moves the staff to the new owner automatically: employment continues uninterrupted, on terms that are, on the whole, not less favourable. The old and new employers must agree in writing who is liable for accrued leave and severance as at the transfer date, and that agreement must be disclosed to the employees. A dismissal because of the transfer is automatically unfair. Staff the buyer does not take across may be a retrenchment cost, which the agreement should allocate.
Who carries the risk afterwards?
In a share sale, the buyer inherits everything, so the buyer asks for warranties and indemnities from you, and sometimes for part of the price to be held back or deferred as security. Expect a thorough due diligence. In an asset sale, the buyer picks the liabilities it takes, which is why buyers like it. But every contract must be ceded or novated, licences may need to be reissued, and the process usually takes longer. For how to protect yourself on warranties and how deferred payments are structured, see our guides on preparing your business for sale and how buyers fund acquisitions.
Does competition approval apply either way?
It can. Both a share sale and the sale of a business unit can be notifiable mergers. From 1 May 2026, an intermediate merger needs combined turnover or assets of R1bn and a target of at least R200m in South Africa. Many mid-market deals fall below that, but check early, because a notifiable deal cannot close before approval. The thresholds are explained in our buy-side guide.
So which should I choose?
Start from your own position. If you hold the shares personally and the buyer wants the whole company, a share sale is usually the simplest and most tax-efficient route for you. If the buyer wants only part of the business, or the company carries risks the buyer will not take, an asset sale or a carve-out may be the only deal on offer; then price it in. The gap in after-tax proceeds is a legitimate negotiating point. A buyer who prefers assets for the tax step-up on depreciation can be asked to pay for that benefit.
Before you agree anything, get your tax adviser and attorney to model both routes on your numbers. Caban is a registered tax practitioner and can help you frame the structure inside a sale process; for a tax opinion on your own position, use a qualified adviser. If you are thinking of selling, start a confidential conversation.
Sources. RSM South Africa, Tax consequences: sale of shares versus sale of a business; MJ Kotze Inc, Share sale vs asset sale; Labour Relations Act 66 of 1995 section 197 and commentary (Cliffe Dekker Hofmeyr; Polity, 2023). Rates are those in force at the date of writing (October 2026); the worked example is illustrative and ignores recoupments, losses and reorganisation relief.
Questions, answered
Is it better to sell shares or assets of my company in South Africa?
For the seller, a share sale is usually simpler and often cheaper in tax, because the gain is typically taxed once as a capital gain (a maximum effective rate of 18% for an individual). An asset sale can add a second layer of tax when the proceeds are paid out of the company. Buyers often prefer assets because they take only the liabilities they choose, so the structure is usually negotiated.
What is the capital gains tax when I sell my company shares?
For an individual, 40% of the gain is included in taxable income, which gives a maximum effective rate of 18% at the top marginal rate of 45%. For a company, 80% is included, about 21.6% at the 27% corporate rate. Individuals have an annual exclusion, and qualifying small business owners may use a lifetime exclusion. Shares held three years or more are treated as capital.
What is section 197 of the Labour Relations Act?
Section 197 applies when a business is transferred as a going concern. Employees move automatically to the new employer on terms that are, on the whole, not less favourable, with continuous service. The old and new employers must agree in writing who pays accrued leave and severance, and tell the staff. A share sale does not trigger it, because the employer does not change.
Do I pay VAT when I sell my business?
In an asset sale, VAT at 15% applies unless the sale qualifies as a going concern, in which case it can be zero-rated if the conditions are met, including a written agreement and both parties being registered VAT vendors. A share sale carries no VAT, but securities transfer tax of 0.25% applies to the transfer.
Is dividends tax payable on the proceeds of an asset sale?
Usually, when the company pays out the proceeds to an individual shareholder as a dividend, dividends tax at 20% applies, with some exceptions. That is the second layer of tax that often makes an asset sale more expensive for the seller than a share sale.
Does a company sale need Competition Commission approval?
Only if it meets the merger thresholds. From 1 May 2026, an intermediate merger needs combined turnover or assets of R1bn and a target of at least R200m. Many mid-market sales fall below that. A notifiable merger cannot close before approval.