Transfer of assets or a business as a going concern can be a solid alternative to share transfer.

When talking about the sale of a company, one immediately thinks of a share transfer, commonly referred to as a share deal. This method, in which the entire company is sold, was until recently tax-neutral in Belgium.

The introduction of a tax on capital gains on shares is a good reminder that there is another way to structure a transfer: the asset deal, or transfer of assets.

Less common but sometimes more suitable, it involves the sale of an independent division of the business.

This method has its own advantages but also certain limitations that are worth recalling.

Which terminology should be used?

In M&A (Mergers and Acquisitions*), the term asset deal is commonly used to describe this type of transaction, both economically and contractually. By contrast, the transfer of a business as a going concern, as regulated by the Companies and Associations Code, includes all the elements required for its operation (client base, lease, trade name, etc.). The transfer of a business unit applies when a company sells a separate business unit that can operate independently.

These three concepts are close and often used as if they meant the same thing, although their meanings differ slightly.

When is this formula relevant ?

An asset deal is particularly relevant when the seller wants to keep certain assets (such as a building) or when the buyer aims to avoid the company’s liabilities and risks. This way, only what is needed to continue the business is transferred.

Price determination

Unlike share deals, where valuation often hinges on the sacrosanct EBITDA multiple, in an asset deal the price is generally based on the value of the assets and rights transferred (equipment, inventory, goodwill).

Naturally, the sale proceeds remain in the company, raising the question of how the seller can convert them into personal assets.

Tax regime and VAT

For the selling company, the transfer of assets is subject to corporate income tax, levied on the capital gain (difference between book value and sale price).

Capital gains and losses can be offset, for example, a loss on inventory may reduce a gain on goodwill. And if the selling company has accumulated tax loss, the corporate tax is effectively neutralized.

For the buyer, the acquired assets are depreciable like any other investment, which is often more advantageous than in a share deal.

In addition, an asset deal is exempt from VAT if it involves the transfer of an entire business and if the buyer is subject to VAT.

Clarity and vigilance

It is essential to define precisely which assets are included in the transfer and which are excluded, as contractual freedom prevails. This raises questions about the trade name, receivables, and non-operating assets

The inventory of assets and stock must be detailed, and the terms for transferring receivables and debts clearly defined.

The transfer date is crucial, as from that date the rights and obligations are transferred to the buyer.

Clear communication with clients and suppliers is essential, since they will now be dealing with a new legal entity and will need to adapt their procedures (references, bank details, etc.).

“Blank” certificates

To avoid joint liability for tax and social debts, the seller must provide ‘blank’ certificates for direct taxes, VAT and NSSO. These certificates, usually obtained through an experienced professional such as an accountant, provide critical safeguards for the transaction.

In conclusion, an asset deal can be an appealing alternative to a share deal, especially when the buyer wants to avoid taking on the company’s existing risks.

It can also ease the due diligence process, which is often onerous and at times even a deal-breaker.

Handled with the right preparation and expert guidance, it offers a smoother, safer, and more tailored transfer for both parties.

Tanguy della Faille

Partner FB Transmission

tanguy.della.faille@fb-transmission.com

(*) M&A or Mergers and Acquisitions is the term used to designate the activity of transferring companies.