When acquiring a business in Korea, one of the first strategic choices is whether to buy the company's shares or to buy its assets. The two structures lead to very different outcomes on liability, tax, required consents, and the treatment of employees. The right answer depends on the target, the risks uncovered in diligence, and each party's tax position.
What Each Structure Transfers
In a share deal, the buyer acquires the company itself, and the business continues with all of its assets, contracts, and liabilities intact. In an asset deal, the buyer selects specific assets and, ideally, only assumes specified liabilities, leaving the rest behind in the seller's entity. This difference is the heart of the choice: a share deal is simpler to execute but carries the target's entire history with it.
Liability Exposure
The main attraction of an asset deal for a buyer is the ability to leave behind unknown or contingent liabilities. A share deal, by contrast, means inheriting everything, which is why share deals demand robust diligence and strong warranties and indemnities in the purchase agreement.
The protection of an asset deal is not absolute, however. Where a buyer acquires a business as a going concern, certain liabilities can follow the business regardless of how the contract allocates them, and creditors may have rights that survive the transfer. Tax authorities and employees, in particular, may look through the form of the transaction, so the carve-out of liabilities should be tested against the practical realities rather than assumed to be clean.
Consents, Contracts, and Employees
An asset deal often requires more third-party cooperation. Key contracts may need counterparty consent to assign, licenses may not transfer automatically, and the transfer of a business may carry obligations toward employees. A share deal usually avoids contract assignment because the contracting entity does not change, although change-of-control clauses can still be triggered. Employee and labor implications differ meaningfully between the two and should be assessed early.
How to Choose
Start with the diligence findings. If the target carries significant unknown or off-balance-sheet risk, an asset deal may be safer despite the extra execution effort. If the value lies in licenses, contracts, or a regulated status that does not transfer easily, a share deal may be the only practical route. Tax outcomes for both buyer and seller frequently drive the final decision, so coordinate legal and tax advice rather than treating them separately.
There is no universally better structure; there is only the structure that fits this target, these risks, and these tax positions. Before you commit to a letter of intent, the deal structure should already be a deliberate choice. We advise foreign acquirers on structuring Korean acquisitions and drafting the agreements that implement them. Contact our office to discuss your deal.