Buying a business in South Africa

South African acquisitions are either a sale of shares or a sale of a business as a going concern.

In a sale of shares, you buy the shares of the private company that owns the business. The company keeps its contracts, licences, employees, tax history and liabilities, so due diligence and the warranties and indemnities in the sale of shares agreement carry most of the protection. Check key contracts for change of control clauses.

In a sale of a business as a going concern (an asset purchase), you buy the business and its assets from the company, partnership or sole proprietor that runs it. The sale agreement lists the assets, the liabilities you take on and the effective date. Leases, contracts and licences have to be ceded, assigned or reissued, often with the other party's consent, and employees usually transfer automatically under section 197 (see below).

Deals often start with a letter of intent or term sheet, followed by due diligence and a signed agreement. The agreement usually contains suspensive conditions, such as finance, landlord consent or competition approval, which must be met before the deal takes effect.

Search the company on the records of the Companies and Intellectual Property Commission (CIPC) early, and compare its directors and registration details with what the seller tells you. Companies must also file beneficial ownership declarations with the CIPC, but that register is not open to the public, so ask the seller for the company's share register and the beneficial ownership information it has filed.

Buyers usually combine their own money with debt and some deferred payment to the seller:

• acquisition and business loans from banks, usually secured and assessed on the business's cash flow and your experience
• vendor finance (seller finance), where the seller is paid part of the price over time
• earn-outs, where part of the price depends on future results
• private equity or investor funding on larger deals

The Small Enterprise Development and Finance Agency, a state-owned company formed in 2024, supports small businesses with finance and development support. Ask whether an acquisition fits its criteria.

If money is coming from outside South Africa, or the buyer is not resident, cross-border flows run through banks acting as authorised dealers under exchange control rules administered by the South African Reserve Bank. Involve your bank early so that funds and any later repayments can move as planned. Financing an acquisition explains how the layers fit together.

In a sale of shares the employer does not change, so employment continues on existing terms.

In a sale of a business as a going concern, section 197 of the Labour Relations Act 66 of 1995 usually applies. The new employer is automatically substituted for the old employer in all contracts of employment that exist immediately before the transfer. Employees move with their continuity of service, and the new employer must keep them on terms and conditions that are, on the whole, not less favourable than before. The section allows a different arrangement only by written agreement with the employees' representatives, so a buyer cannot leave staff behind simply by leaving them out of the sale agreement.

This means obligations to staff, such as accrued leave pay, generally come with the business. The Act also requires the seller and buyer to agree a value for accrued leave pay, severance pay and other amounts owed to the transferring staff, and to record in writing which of them pays. Agree how these amounts are reflected in the price, get a full staff schedule with pay and leave balances, and take advice from a labour law specialist before you plan any change to terms, roles or headcount. Check too for contractors who work like employees, and see contractors who are employees in practice.

• VAT. The sale of a business as a going concern can be zero-rated for VAT. The conditions include that the seller and buyer are both registered vendors, that they agree in writing that the business is sold as a going concern and will be an income-earning activity on the date of transfer, that the seller disposes of all the assets needed to carry on the business, and that they agree in writing that the price includes VAT at the zero rate.
• Securities transfer tax. Transfers of shares carry securities transfer tax at 0.25% of the taxable amount. For unlisted shares, the company whose shares are transferred is liable for the tax but can recover it from the person who receives the shares, so the agreement should say who bears the cost.
• Transfer duty. Transfer duty applies to the value of property acquired, including land and fixtures and a share or interest in a residential property company. If the deal includes property, get advice on whether transfer duty or VAT applies.
• Tax compliance. Ask the seller to share its tax compliance status. When a taxpayer requests its status from SARS, it receives a security code that lets a third party view the status online through eFiling at the time of viewing. Historic tax liabilities stay with the company in a sale of shares, and see unpaid taxes a buyer could inherit.
• Merger control. Intermediate and large mergers must be notified to the Competition Commission and may not be implemented until approved. The thresholds were raised with effect from 1 May 2026: a merger is at least intermediate where the combined annual turnover or assets of the parties reach R1 billion and those of the business being acquired reach R200 million. Small mergers do not usually need approval, but the Commission can require the parties to notify one within six months after implementation.
• B-BBEE. The B-BBEE codes of good practice measure ownership as one element of a company's scorecard. A change of shareholders can change the company's B-BBEE level, which matters where customers, tenders or sector charters rely on it.
• Personal information. Customer and employee records are personal information under the Protection of Personal Information Act (POPIA), overseen by the Information Regulator. Check that the business collected and uses them lawfully before you take them over, and see customer data collected without valid consent.
• Licences. Trading, health and other licences can be issued by national, provincial or municipal authorities. Check whether each one can move to you or needs a new application.

• An attorney experienced in company acquisitions, for the agreement, suspensive conditions and legal due diligence, with a labour law specialist for section 197.
• A chartered accountant or tax practitioner, for financial due diligence, structure, VAT, securities transfer tax and transfer duty.
• A corporate finance adviser or business broker. A broker usually acts for the seller.
• Your bank, for acquisition finance and any exchange control approvals.
• A competition law specialist if the deal could meet the merger thresholds.
• A B-BBEE consultant or verification agency where the scorecard matters to customers.

• Decide between a sale of shares and a going concern sale with tax and legal advice.
• Search the CIPC records, and check the directors, share register and beneficial ownership filings against what the seller tells you.
• Confirm the VAT zero-rating conditions are written into the agreement.
• Get the seller's tax compliance status and a clear answer on who bears securities transfer tax or transfer duty.
• Get a full staff schedule and plan for section 197 before you sign.
• Check whether competition approval, exchange control or B-BBEE considerations apply.
• Work through the diligence document request list and Due diligence: what to check and in what order.

If you want a listing's figures and public records checked before you instruct advisers, see what's in a dossier.