In this guide
- In a share sale the company, with its contracts, licences, staff and history, passes to the buyer unchanged.
- In an asset sale the buyer chooses the assets and leaves liabilities with your company.
- Share sales are usually simpler and faster; asset sales need each lease, contract and licence moved or re-applied for.
- In an asset sale the money goes to your company first, so plan how you will take it out.
- Sole proprietorships and partnerships have no shares, so they are always sold as asset sales.
The difference in one table
| Share sale | Asset sale | |
|---|---|---|
| What is sold | Your shares in the company | The business: chosen assets, goodwill, stock, contracts |
| Who sells | You, as shareholder | Your company |
| Who receives the money | You | Your company, then you |
| Past liabilities | Stay in the company, so pass to the buyer | Mostly stay with your company |
| Staff | Stay employed by the same company | Move to the buyer under the Employment Act, or are re-hired |
| Licences, leases, contracts | Stay in place, subject to change-of-control terms | Each must be assigned, novated or re-applied for |
| Buyer’s protection | Warranties, indemnities and due diligence | Choosing what to take, plus warranties on those assets |
| Usual speed | Faster, fewer third parties | Slower, more consents |
Why sellers usually prefer a share sale
- A clean exit. You sell the whole company and walk away, rather than being left with a company shell to wind up.
- The money comes to you. The price is paid to you as shareholder, not to your company.
- Less disruption. Staff, customers and suppliers keep dealing with the same company, and many contracts and licences carry on.
- Fewer moving parts. Fewer landlord, supplier and regulator consents usually means a shorter path to completion.
The trade-off is that the buyer inherits the company’s history, so expect thorough due diligence and a sale agreement with warranties and indemnities. See our due diligence checklist.
Why buyers often prefer an asset sale
- No inherited liabilities. Old tax issues, disputes or claims mostly stay with your company.
- Choice. The buyer can take the outlets, contracts and equipment it wants and leave the rest.
- A fresh start for its own systems, contracts and accounting.
Buyers also tend to prefer asset sales when a company has a long or untidy history, when only part of the business is for sale, or when they cannot get comfortable with the records. Cleaning up the company before you sell, including its accounts, tax filings and contracts, makes a share sale easier to agree.
Staff, licences and leases
In a share sale, your company stays the employer, so staff contracts carry on unchanged. In an asset sale where the business is transferred as a going concern, staff covered by the Employment Act move to the buyer automatically under section 18A, and you must inform and consult them first. Staff outside the Act need new contracts.
Licences are often issued to a specific company or person. In a share sale they usually stay with the company, though some regulators must be told of a change of control. In an asset sale many must be re-applied for: Singapore Food Agency food licences, for example, cannot be transferred. Leases need the landlord’s consent to assign in an asset sale, and may need it in a share sale if the lease has a change-of-control clause. Check each one before you agree the structure.
Tax, stamp duty and GST
- Gains. Singapore does not have a capital gains tax, so a gain on selling a business you have built for the long term is generally not taxed. Whether a particular gain is capital or income depends on the facts, so confirm your position with a tax adviser.
- Stamp duty. A share sale attracts stamp duty on the share transfer, usually paid by the buyer. In an asset sale, stamp duty applies to any property or lease interest transferred, not to equipment or goodwill.
- GST. Shares are exempt from GST. In an asset sale by a GST-registered company, the transfer can fall outside GST if it qualifies as a transfer of a business as a going concern.
- Getting the money out. In an asset sale the price is paid to your company. You then take it out, for example as dividends or by winding the company up, and each route has its own steps and timing.
Our guide to tax and stamp duty when selling a business has worked examples.
The middle route: moving the business into a new company first
Sometimes neither structure fits. A common middle route is to move the business, or the part being sold, into a new company and then sell the shares in that new company. The buyer gets a clean company without the old history, and you still sell shares. It takes more preparation, including asset transfers, consents and tax advice, so start early if it might suit you.
How to decide
Start with three questions:
- Is the company clean? If its accounts, tax filings, contracts and compliance are in order, a share sale is usually achievable and the better route for you.
- What does the buyer need to keep? If the value sits in licences, leases or contracts that are hard to move, a share sale protects it.
- What is being sold? The whole business points to a share sale. One outlet, one division or selected assets point to an asset sale.
The structure also changes how offers should be compared. Two offers at the same price can leave you with very different amounts after tax, liabilities and the cost of getting money out of the company. Our guide to deal structures shows how to compare them.
Questions owners ask
Is a share sale or an asset sale better for the seller in Singapore?
A share sale is usually better for the seller. You sell the whole company, the price is paid to you directly, and staff, contracts and many licences carry on. Buyers sometimes insist on an asset sale to avoid inheriting liabilities, especially where the company’s history or records are untidy.
Who pays stamp duty on a share sale in Singapore?
The buyer normally pays stamp duty on a share transfer, although the sale agreement can say otherwise. In an asset sale, stamp duty applies only to property or lease interests transferred, not to equipment or goodwill.
Do employees transfer in an asset sale?
Where the business is transferred as a going concern, staff covered by the Employment Act move to the buyer automatically under section 18A, on the same terms and with continuous service. Staff outside the Act need new contracts. In a share sale, nothing changes for staff because the employer stays the same.
Can a sole proprietorship be sold as a share sale?
No. A sole proprietorship or partnership has no shares, so it is sold as an asset sale: the buyer takes over the business and its assets and registers its own business.