Quick answer
Prepare a transaction map before negotiating detailed wording. State whether the proposal is a share sale, selected-asset sale or transfer of an operating enterprise; identify the buyer, seller and target; and list what must move for the business to function the day after closing. Mark every point that is still an assumption.
How to use this guide
Before the legal call, draw the proposed structure and the business that must exist after closing. Identify buyer, seller and target; distinguish shares, selected assets and an operating enterprise; list what transfers and what stays behind; and mark approvals, employees, tax flags, consents, finance, deposits and conditions that remain unresolved.
Map the proposed transaction
Draw the transaction before asking the lawyer to document it. Identify buyer, seller and target, then distinguish a share acquisition from selected assets or an operating enterprise. List what must transfer and what must remain behind. The chosen label does not settle how liabilities, employees, contracts, licences, leases, tax registrations, intellectual property or working capital will be treated.
Run the structure and continuity checks
Map these deal components before the first legal call:
- Confirm the legal parties, ownership, signing authority and whether the target or seller is in distress.
- Describe the proposed structure and list included assets, assumed liabilities, excluded items and retained obligations.
- Identify employees, premises, licences, permits, intellectual property, data and key contracts needed for continuity.
- Record board, shareholder, lender, landlord, regulator, counterparty and competition approvals or consents that may apply.
- Flag VAT, transfer duty, securities transfer tax and allocation issues for transaction-specific tax advice.
- List deposits, exclusivity, due-diligence access, finance, conditions, long-stop dates and the intended closing sequence.
Preserve deal assumptions
Record the assumptions already built into price and continuity. For each critical premise, contract, employee group, licence, asset, system and data set, note the owner, transfer mechanism, consent requirement and consequence if unavailable at closing. Early source records and a clear gaps list are more useful than assurances that every necessary item is “included in the business”.
Define the pre-signing decision
Identify the pre-signing decision the lawyer must support. It may concern structure, binding heads, exclusivity, deposit custody, diligence access, finance or conditions. Do not assume that every asset sale triggers the same Companies Act approval, labour consequence or tax treatment. Give tax, labour and other specialists enough time to test the commercial plan before it hardens into signed terms.
Avoid premature commitments
Keep the parties uncommitted while these points remain unresolved:
- Do not sign heads of terms assuming every clause is non-binding.
- Do not pay a substantial deposit before authority, custody, refund triggers and conditions are documented.
- Do not assume the chosen asset-or-share label determines employee, tax, consent or liability consequences.
- Do not promise that a transaction is a VAT zero-rated going concern before every statutory condition is checked.
Prepare the transaction map
Summarise the proposed transaction on a single deal map:
- Draw a one-page before-and-after ownership and operating structure.
- List what the buyer needs to operate and who currently owns or controls each item.
- Mark known liabilities, disputes, security, employee issues and related-party arrangements.
- Identify decisions needed before exclusivity, deposit, diligence or binding terms.
- Ask the lawyer to scope structure, diligence, drafting, conditions, closing and specialist interfaces separately.
Deeper analysis: small-business transaction triage
Test the structure against operational reality. A buyer may need premises, staff, customer and supplier contracts, licences, stock, systems, data and intellectual property to continue trading. For each dependency, record its owner, transfer mechanism, consent requirement and consequence if it is unavailable at closing. This exposes gaps that the asset-or-share label alone cannot solve.
Record legal and tax questions without assuming their answer. Companies Act section 112 does not govern every asset sale; a transaction called a going concern is not automatically VAT zero-rated; and a share sale does not necessarily avoid VAT, transfer duty or securities transfer tax. Early specialist input can prevent price and document assumptions from hardening incorrectly.
Treat heads, exclusivity, deposits and diligence access as decision gates. Clauses described as preliminary may still bind the parties on confidentiality, costs, forum or exclusivity. Before payment or sensitive disclosure, identify custody, refund triggers, lawful data processing, authority and the conditions that must be satisfied before either side is committed.
The first structural question is usually whether the proposed deal transfers shares or selected business assets. That choice can change which liabilities, employees, contracts, licences, leases, approvals and tax considerations need investigation, and whether third-party consent is required. Do not treat the labels as interchangeable or decide from a generic template. Give the lawyer the commercial outcome both sides want, the proposed perimeter and any continuity requirements so the legal structure can be tested before binding terms are signed.
What triage cannot determine
A transaction map cannot select the final structure, verify value or guarantee closing. Employees, tax, consent, competition, property, security and distress issues require fact-specific advice. Obtain review before binding heads, a substantial deposit, exclusivity or a promise that assumes approvals and transfer mechanics are already settled.
FAQs
What is the first structure question?
Decide whether the buyer is acquiring shares, selected assets or an operating enterprise, then test the legal and tax consequences rather than relying on the label.
Are heads of terms always non-binding?
No. Confidentiality, exclusivity, costs, access, governing law or other clauses may be binding depending on their wording.
Does every asset sale need shareholder approval?
No. Companies Act section 112 depends on statutory thresholds, facts and exceptions, so the transaction must be classified.
Should tax advice be obtained early?
Yes. VAT, transfer duty, securities transfer tax and allocation can affect structure, price, warranties and closing documents.
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Legal note
This article is general legal information for South African readers. It is not legal advice. Speak to a qualified legal professional about your specific facts before taking action.