Share sale or asset sale
The starting structural question is whether the buyer is acquiring the shares in the company that runs the business, or the assets that make up the business itself. Asset sales are common for owner-operated businesses; share sales are more usual where the company holds licences, leases or contracts that are difficult to assign. Each has different tax, stamp duty and risk consequences, and the right structure is a question for advice, not assumption.
Due diligence
For buyers, due diligence is the opportunity to test the financial, contractual and regulatory position of the target before commitment. Areas typically reviewed include trading history and financial statements, key supplier and customer contracts, the lease of the trading premises, employee arrangements, intellectual property, and any litigation or regulatory exposure. For sellers, a degree of preparatory work ("vendor due diligence") shortens the deal and reduces the risk of price chips late in the process.
Contract structure and warranties
The sale contract should reflect what each party has actually agreed and what each is willing to stand behind. Warranties from the seller address the state of the business at completion; indemnities allocate identified risks; conditions precedent handle approvals (landlord consent to assignment, regulatory approvals, finance). Limitation of liability provisions — monetary caps, time limits, de minimis thresholds — usually require careful negotiation.
Employees, leases and licences
The transfer of employees in an asset sale involves obligations under the Fair Work Act 2009 (Cth) and any applicable modern award or enterprise agreement, including in relation to accrued entitlements. Assignment of a commercial lease typically requires landlord consent and may trigger a personal guarantee from the incoming tenant. Licences and registrations should be reviewed early because some are not transferable.
Completion and post-completion
Completion usually involves the exchange of executed transfer documents, payment of the purchase price (often with retention or escrow arrangements), and notification of third parties. Post completion, attention turns to working capital adjustments, warranty notice periods and any restraint of trade obligations imposed on the seller.
How Hanlons can help
We act for buyers and sellers of small to mid-market Victorian businesses, including in transactions where the business is being purchased from an existing listing of commercial business for sale in Melbourne. For more on our practice see commercial and business law and our property and conveyancing page where premises form part of the transaction.
General information only
This article provides general information about Victorian law and is not legal advice. Estate disputes and contested wills turn on individual facts and strict statutory time limits. For advice tailored to your circumstances, please speak with our contested wills team or send an enquiry.