Buying the shares in a company means acquiring the company with everything in it — outstanding annual returns and penalties, unfiled beneficial ownership, SARS debt, contracts, disputes and liabilities that predate you. Buying the assets out of the company instead leaves those behind with the seller. Before either, pull the CIPC record yourself, get a tax compliance status, and ask for the securities register.
The seller's assurance that "everything is in order" is not a check. The CIPC record takes ten minutes and tells you a great deal.
Shares or assets? Decide this first
This single decision determines how much risk you are taking on.
| Buying shares | Buying assets | |
|---|---|---|
| What you acquire | The company, with everything in it | Specific assets and, if agreed, specific liabilities |
| Historic liabilities | Yours | Stay with the seller |
| SARS history | Yours | Stays with the seller |
| Arrear CIPC returns | Yours | Not applicable |
| Contracts and licences | Continue automatically | Must be ceded, often with consent |
| Trading history and registration number | Preserved | Lost |
| Complexity | Simpler mechanically, riskier | More work, safer |
Buying assets is usually the lower-risk route for a small acquisition, precisely because you leave the history behind. The trade-off is that contracts, leases, licences and registrations have to be moved across, and some require the counterparty's consent.
Buy shares where the value is genuinely in the entity — a long trading history, licences tied to the registration number, a CIDB grading, contracts that cannot be ceded. Then do the diligence properly.
The CIPC checks
Do these yourself. Do not rely on documents the seller sends you.
1. Pull a disclosure certificate. Company status, current directors, registered address, financial year end, registration date. Status must read "in business" — anything else is a stop sign. See what is a CIPC disclosure certificate.
2. Check annual returns. Every year since incorporation. Arrears come with penalties, and a company in deregistration process is not something you want to discover after transfer. See what is your company's anniversary date.
3. Check beneficial ownership has been filed and is current. An unfiled register blocks the annual returns you will need to file. See what happens if you don't file beneficial ownership.
4. Read the MOI. What are the authorised and issued shares? Are there pre-emptive rights requiring the shares to be offered to existing shareholders before you? Does a transfer need board approval? A share sale that ignores pre-emptive rights can be challenged later. See what is an MOI and do you need a custom one.
5. Check the directors. Are the people you are dealing with actually directors? Are there directors nobody mentioned? Did a director resign years ago without it being filed?
6. Confirm the registered address is somewhere correspondence actually reaches. If it is stale, CIPC notices have been going nowhere. See how to change your registered address at CIPC.
Ask the seller for these
The securities register. This is the legal record of who owns the shares you are buying. If it does not exist, you cannot verify that the seller owns what they are selling — and in a small company it frequently does not. Treat that as a serious finding rather than an administrative one. See how to issue shares to a new shareholder.
Share certificates, and the resolutions authorising every issue and transfer.
Any shareholders' agreement. You may be stepping into obligations, restraints and buy-out provisions.
Annual financial statements for at least three years, and management accounts to the most recent month.
Loan account records. Shareholder loans are debts of the company. Are they being settled, ceded to you, or written off? Get this stated explicitly in the agreement — it is a common source of post-completion argument.
Employment records — contracts, leave balances, any disputes. Where a business transfers as a going concern, employees generally transfer on terms no less favourable, so their accumulated obligations come with them.
Leases, supplier contracts and customer contracts, checking for change-of-control clauses. Some allow the counterparty to terminate on a change of ownership, which can destroy the value you are buying.
The SARS checks, which matter more than CIPC
A tax compliance status PIN. This lets you verify the company's status with SARS directly rather than taking the seller's word. Insist on it.
Outstanding returns — income tax, VAT, PAYE. Every unfiled return is a potential assessment and penalty.
Assessed losses. These can be valuable, but there are restrictions on their use, and rules that can affect them where there is a change of ownership combined with a change in the business. Take advice rather than assuming a loss you can see in the accounts is a loss you will be able to use.
VAT and PAYE registrations — active, correctly categorised, and up to date.
The registered representative, which must be changed to you or your appointee immediately on transfer. Miss this and SARS correspondence keeps going to the seller. See what is a SARS registered representative.
Any payment arrangement or dispute in progress.
Protecting yourself in the agreement
Warranties. The seller warrants the company's position — that returns are filed, taxes paid, no undisclosed liabilities, no litigation, the shares are unencumbered.
An indemnity for anything arising from the period before transfer. A warranty from a seller with no assets is worth nothing, so consider who is giving it and whether they will be findable in two years.
Retention of part of the price, held back for an agreed period against undisclosed liabilities. This is the most practically effective protection available on a small deal.
Conditions precedent — the sale conditional on arrear returns being filed, a clean tax compliance status being produced, and consents obtained, all before you pay.
Make the seller fix the compliance before completion, not after. Once you own the company, the arrears are yours.
After you buy
File the share transfer in the securities register and issue new certificates.
Update beneficial ownership at CIPC within the required period — generally 10 business days.
File director changes on a CoR39, and remove the seller.
Change the SARS registered representative immediately.
Update the registered address if it was the seller's.
Update bank mandates, and every registration that lists directors — CSD, COIDA, CIDB, B-BBEE, insurance.
Bring any outstanding CIPC filings up to date, in order: beneficial ownership, then annual returns oldest first. See why CIPC rejects filings and how to fix them.
Frequently asked questions
What should I check at CIPC before buying a business? Pull a disclosure certificate to confirm the company status, current directors and registered address; check every annual return since incorporation; confirm beneficial ownership is filed and current; read the MOI for pre-emptive rights and transfer restrictions; and verify the people you are dealing with are actually directors.
Is it better to buy shares or assets? Buying assets is usually lower risk for a small acquisition because historic liabilities, SARS history and arrear CIPC returns stay with the seller. Buying shares makes sense where the value is in the entity itself — trading history, licences tied to the registration number, or contracts that cannot be ceded.
Do I inherit the company's debts if I buy the shares? Yes. Buying shares means acquiring the company with everything in it — SARS debt, arrear CIPC returns and penalties, contracts, disputes and liabilities predating your purchase. This is why warranties, indemnities and a retention are essential.
How do I check if a company owes SARS money? Ask for a tax compliance status PIN, which lets you verify the position with SARS directly rather than relying on the seller. Also review outstanding returns for income tax, VAT and PAYE, and ask about any payment arrangement or dispute.
What if the seller has no securities register? Treat it as a serious finding. The securities register is the legal record of share ownership, so without it you cannot verify the seller owns what they are selling. It is common in small companies and it needs to be reconstructed and confirmed by the shareholders before transfer.
Can I use the company's assessed loss after buying it? Not necessarily. There are restrictions on the use of assessed losses, and rules that can affect them where a change of ownership coincides with a change in the business. Take advice rather than assuming a loss in the accounts is one you can use.
What must I do at CIPC after buying a company? Record the transfer in the securities register and issue new certificates, update beneficial ownership within the required period, file the director changes on a CoR39, change the registered address if needed, and bring any outstanding filings up to date.
Ten minutes of checking, or years of someone else's history
The CIPC record is public and cheap. Almost nobody looks at it before signing, and it is where the arrear returns, the phantom director and the deregistration process are visible.
Smartbook runs CIPC and SARS compliance checks on target companies before you buy, and handles the post-transfer filings so nothing is left in the seller's name.
Check a company's CIPC compliance →
Last reviewed: 30 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Buying a business involves legal and tax considerations specific to the transaction — take advice from an attorney and a tax practitioner before signing. General guidance, not legal or tax advice.
Primary sources: CIPC · Companies Act 71 of 2008 · SARS · Income Tax Act 58 of 1962 · Labour Relations Act 66 of 1995