Share Deal or Asset Deal: Understanding the Two Structures for Selling an SME

Share deal or asset deal: understanding the two structures for selling an SME in French-speaking Switzerland

When you consider selling your SME, one of the first questions you will ask — or that your adviser will ask you — is this: is it a share deal or an asset deal? This seemingly technical question has considerable consequences for taxation, liability, the net price received and the complexity of the transaction.

The purpose of this article is to explain these two structures clearly, without unnecessary jargon, so that you can approach your discussions with a buyer or an adviser with full knowledge of the facts. The aim is not to steer you towards one option or the other, but to give you the keys to understanding what is at stake. A decision of this importance deserves individual tax and legal support, which we encourage you to seek before signing anything.

The share deal: selling the shares of your company

Definition and mechanics

In a share deal, you sell the ownership titles of your company, i.e. your shares in an SA or your company interests in a Sàrl. The buyer becomes the owner of the company as a legal entity, together with everything it contains: its assets, its liabilities, its contracts, its employees, its leases, and any pending litigation.

The company itself does not change. Only its shareholding changes. From the perspective of third parties — customers, suppliers, banks, employees — continuity is complete. Contracts remain in force, commercial leases continue, and employment relationships are not interrupted.

Taxation of the seller: the advantage of the private capital gain

For a seller who is a natural person holding the shares directly, the share deal generally offers a major tax advantage in Switzerland. As a general rule, the capital gain realised on the sale of privately held shares is exempt from income tax at both federal and cantonal level.

This means that if you sell your shares for CHF 3 million when you had acquired them for CHF 500,000, the gain of CHF 2.5 million is, subject to certain conditions, not taxed personally. This is a fundamental principle of Swiss tax law that anyone considering a business transfer must fully understand.

Caution: anti-abuse rules exist, particularly regarding indirect partial liquidation and transposition. A prior tax analysis remains essential. To explore this point further, we invite you to read our dedicated article: The tax aspects of selling an SME in Switzerland.

Legal continuity and liability

The counterpart of this tax advantage is a residual liability for the seller. Since the buyer takes over the company as it stands, they also inherit any hidden liabilities: undisclosed litigation, unprovisioned tax commitments, guarantees given to customers, environmental liabilities.

This is why the sale agreement systematically includes representations and warranties from the seller, together with a warranties and indemnities clause. Negotiating this protection — its scope, its duration, its cap — is one of the central issues in a share deal.

The asset deal: selling the assets of your company

Definition and mechanics

In an asset deal, it is not the company that is sold, but a set of assets it holds: the business goodwill, machinery, inventory, customer base, contracts, patents, trademark, and possibly commercial leases. The legal entity remains the property of the seller — but stripped of its operating content.

The parties define precisely, contract by contract, asset by asset, what is sold and what is not. Liabilities may be taken over by the buyer, but only if they are expressly mentioned in the agreement.

Taxation of the seller: taxation at company level

In an asset deal, it is the company that receives the sale proceeds, not the shareholder directly. The gain realised on the sale of the assets is taxed as a profit of the company, subject to corporate income tax (direct federal tax and cantonal and communal tax).

If the seller then wishes to recover these funds personally, they will have to extract them from the company in the form of a dividend or repayment, which generates additional taxation. The cumulative tax burden (corporate income tax + tax on the dividend) can be significantly higher than in a share deal.

Selective takeover and contractual discontinuity

The asset deal involves a legal discontinuity: current contracts do not transfer automatically. Each contract — commercial lease, supplier contract, customer contract, employment contract — must be assigned or expressly agreed by the parties concerned.

Under Swiss employment law, the transfer of a business or part of a business entails the automatic transfer of employment contracts (art. 333 CO), but with certain nuances depending on the structure chosen. This dimension deserves in-depth analysis with specialised legal counsel.

Comparison from the seller's side

Here are the main criteria to consider when assessing these two structures from your point of view:

• Taxation: the share deal is generally more favourable for a seller who is a natural person (potentially tax-exempt capital gain), whereas the asset deal generates taxation at company level.
• Administrative simplicity: the share deal is structurally simpler — you sell shares. The asset deal requires listing, valuing and transferring each asset individually.
• Warranties and indemnities: in a share deal, the seller remains exposed through the warranty clauses. In an asset deal, liabilities not taken over remain in the selling company, which can represent a form of protection.
• Net price received: for an equivalent gross price, the share deal generally offers a higher net return for the seller, owing to the lighter tax burden.

Comparison from the buyer's side

The buyer often has different preferences from the seller, which explains why the structure is systematically a matter for negotiation:

• Hidden risks: in a share deal, the buyer takes over all of the company's liabilities, including risks not identified during due diligence. The asset deal allows them to choose precisely what they take over, and thus to isolate the risks.
• Tax depreciation: in an asset deal, the buyer can depreciate the acquired assets for tax purposes at their new acquisition value, which generates future tax savings. In a share deal, the existing book values are inherited, with no possibility of amortising the goodwill paid (as a general rule).
• Structuring the financing: both structures are compatible with bank financing, but the terms differ. The buyer and their bank will analyse the implications of each structure for security and cash flows.
• Complexity of the acquisition: the share deal is often quicker to execute, whereas the asset deal requires more legal work and coordination with third parties (creditors, customers, employers).

These differences in interests explain why the structure of the transaction is an integral part of the negotiation between seller and buyer — and why it should ideally be addressed as early as the letter of intent stage. On this point, see our article: The letter of intent: what this key document contains in the sale of your SME.

When to favour one or the other?

Situations where the share deal is the natural choice

• The company is structured as an SA or a Sàrl, with well-kept accounts and a clean legal position.
• The seller is a natural person holding the shares directly, wishing to benefit from the capital gains exemption.
• The value of the business rests on contracts, approvals, concessions or customer relationships that cannot be transferred individually without the consent of third parties.
• The buyer wants a quick acquisition and complete operational continuity.

Situations where the asset deal is preferred

• The company has problematic liabilities, or legal or tax risks that the buyer does not wish to take over.
• The buyer only wishes to take over part of the business (a product line, a division, a geographical site).
• Due diligence reveals significant areas of uncertainty that make the share deal too risky for the buyer.
• The seller operates as a sole proprietorship (there are then no shares to sell, and the asset deal is the only structurally available option).
• Tax considerations specific to the buyer's situation make the asset deal more advantageous despite the complexity.

It is common for seller and buyer to have opposing preferences. The final structure is then the result of a negotiation, sometimes accompanied by a price adjustment to compensate for one party's tax disadvantages. It is a delicate exercise, requiring competent advice on both sides of the table.

To be well prepared for this discussion, make sure you have put together a solid file beforehand. Our practical guide will help you: Which documents to prepare to sell your SME in French-speaking Switzerland.

Our approach at Vendre-Entreprise.ch

At Vendre-Entreprise.ch, we act as a direct buyer of SMEs in French-speaking Switzerland. This means we are not an intermediary seeking to connect seller and buyer: we are ourselves the potential buyer, which simplifies and speeds up the discussions.

When we analyse an acquisition opportunity, the question of structure — share deal or asset deal — is among the first discussions we have with the seller. Our approach is transparent: we set out the implications of each structure for both parties, and together we look for the solution best suited to the SME's profile, the seller's personal situation and the objectives of the transaction.

There is no universal answer. Every sale is unique, and the optimal structure depends on a combination of factors: the company's legal form, the composition of its shareholding, the state of its accounts, the nature of its assets, any liabilities, and the respective expectations of the parties. That is precisely why we favour an open dialogue from the earliest stages.

In summary

The choice between share deal and asset deal is one of the most structuring decisions in a sale process. To help you see clearly:

• The share deal transfers the company's shares — complete continuity, taxation often favourable for a seller who is a natural person, but residual liability through warranties and indemnities.
• The asset deal transfers the company's assets — more flexibility for the buyer, but taxation at company level and greater administrative complexity.
• The ideal structure depends on your personal situation, the state of your company and the buyer's expectations.
• Negotiating the structure is an integral part of negotiating the price.

This article is a simplified overview for educational purposes. It does not constitute tax or legal advice. Before taking any decision, we strongly recommend that you consult a fiduciary, a lawyer specialising in company law and/or a qualified tax adviser, who will analyse your personal situation and guide you towards the most suitable structure.

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