When selling part of a company, should you sell shares or assets?

The answer depends in particular on the objectives pursued and the structure of the company. When a business is operated by a corporation, it is possible to sell some of the company's shares , some of its assets , or, in certain circumstances, to structure a transaction combining different operations.

However, these two types of transactions produce very different legal, fiscal and commercial effects.

Selling a portion of a share involves a shareholder transferring part of their ownership stake in the company to a buyer. The buyer then becomes a shareholder and acquires the rights attached to the purchased shares. However, the company remains the owner of its assets and retains its rights, contracts, and obligations.

Asset sales , on the other hand, are carried out by the company and allow it to transfer only certain elements of the business, such as equipment, buildings, inventory, specific contracts, or a division of its operations. The company retains ownership of the other assets and generally continues to operate.

The choice between these two approaches depends in particular on:

• the objectives of the seller and the buyer;
• of the shareholding in the company or of the activities that are to be sold;
• of the company structure;
• tax consequences of the transaction;
• existing contracts and consents that may be required;
• restrictions provided for in the articles of association or in a shareholders' agreement containing buy-sell clauses;
• guarantees that the parties are willing to grant.

For example, when a company wishes to sell only part of its business while retaining the rest, an asset sale may be considered. Conversely, when a shareholder wishes to sell part of their stake in the company and allow a new shareholder to join, a partial sale of their shares may be considered.

Since these two types of transactions have different legal, tax and commercial consequences, it is recommended to assess the advantages and disadvantages before undertaking the process.

In summary , there is no single solution for selling part of a business. Depending on the situation, it may be preferable to sell a portion of the company's shares, some of its assets, or to structure a transaction involving several operations. A preliminary analysis will help determine the most suitable structure for the intended transaction.