date | theme

22. September 2018 | Asset Deal at the GmbH purchase: Purchase price tax depreciation

26. October 2018 | Share Deal: Company Purchase & Sale of a GmbH (this contribution)

09. November 2018 | Share Deal at the GmbH: 3 designs for tax optimization

17. May 2019 | Purchase of GmbH: Share Deal and Asset Deal – 3 designs for the buyer

If you have decided that you want to buy or sell a GmbH, then you have already made a very important decision. The second question follows immediately. In what form of contract should the company be bought or sold? There are basically two ways to answer this question. On the one hand as part of an asset deal and on the other hand through a share deal. Here we show the advantages and disadvantages of the share deal for the seller and buyer.

Through this and the contribution already made to the Asset Deal, as well as through personal discussions with our specialized and experienced tax attorneys and tax consultants, we would like to support you in the decision-making process. Together with you, we find the best possible form of contract, develop customized design variants for tax optimization and accompany you throughout the entire course of the corporate transaction.

In the following article, we would like to focus on the acquisition of a company as part of a share deal.

Definition of Share Deal

In the so-called share deal, the seller sells his shareholding to the acquirer, who then continues the existing company as sole shareholder and shareholder. Just like the asset deal, the share deal, both the purchase contract and the assignment, requires notarization in accordance with § 15 paragraph 3 and 4 GmbHG.

Advantages and disadvantages for the acquirer of the company

3.1. Few advantages

The biggest advantage of this form of contract compared to the asset deal lies above all in the comparatively simple structure. This will enable the Treaty to be implemented quickly. The object of purchase is easy to grasp, taking into account the determinate principle, approvals of the shareholders are only conditionally necessary and the seller does not lag behind with any shell company. By buying the entire company, the existing contracts remain unaffected and the existing shareholders remain in place.

3.2. Many disadvantages

The major tax disadvantage with this contract design is that the buyer can deduct the purchase price for tax purposes only when the purchase is continued. As long as the acquisition costs are only a tax, insignificant asset position. A further disadvantage is that any unknown liabilities are to be borne by the acquirer. Therefore, we strongly recommend a careful due diligence of the entire company before concluding the contract in order to reduce this risk.

Just as for the buyer, the fast and uncomplicated purchase process is also a great advantage for the seller. The transfer of the shares also transfers all liabilities and liabilities to the acquirer, so that the seller retains (almost) no risks. Similarly, the share deal is to be preferred by the seller, as he enjoys the most tax advantages within the framework of this contract drafting.

4.2 Hardly any disadvantages when selling through a share deal

For the seller, the share deal is in principle in no way disadvantaged. By selling the shares in the GmbH, the seller has on the one hand chosen the best tax form for him, as well as transferred all contaminated liabilities. In addition, he avoids the liquidation of the empty shell of the GmbH.

However, the share deal for the buyer is associated with taxes. In principle, the seller must take this into account. For example, if the buyer generates important tax benefits through depreciation in the asset deal, he can also finance a higher purchase price from banks and pay it to the seller.

We therefore recommend our clients to convert their GmbH into a GmbH & Co. KG at an early stage. A five-year period shall apply. On this subject we also have at the end of this article a