- 1Decide early whether the deal is a sale of shares or a sale of business assets — the risks and paperwork differ significantly.
- 2Due diligence is your chance to find problems before you are contractually committed.
- 3Warranties, restraints and the handover of leases, staff and contracts are where most post-sale disputes come from.
Share sale or asset sale?
The first legal question in any business transaction is what is actually being sold. In a share sale, the buyer acquires the company itself — including its history, contracts, employees and any liabilities, known or unknown. In an asset sale, the buyer acquires selected assets of the business, such as goodwill, equipment, stock, intellectual property and the business name, while the seller's company keeps what is not transferred.
Each structure has different tax, duty and risk consequences for both sides, so the choice should be made with your accountant as well as your lawyer. Sellers tend to prefer a share sale for a clean exit; buyers tend to prefer an asset sale so they can leave historical liabilities behind.
| Share sale | Asset sale | |
|---|---|---|
| What is sold | The company itself | Selected business assets |
| Liabilities | Stay with the company (and pass to buyer) | Generally stay with the seller |
| Contracts & leases | Stay in place, subject to any change-of-control clauses | Must be assigned or re-signed |
| Employees | Remain employed by the company | Offered new employment by the buyer |
| Typical preference | Sellers (cleaner exit) | Buyers (fewer inherited risks) |
The usual sequence of a deal
- ✓Heads of agreement or a term sheet recording the price, structure, key conditions and timing — non-binding apart from confidentiality and exclusivity, unless the parties agree otherwise.
- ✓Due diligence, where the buyer reviews the business's financials, contracts, leases, employees, intellectual property, licences and disputes.
- ✓The sale contract, negotiated between the parties, including conditions such as finance, landlord consent or licence transfers.
- ✓Satisfaction of conditions, including any assignment of the premises lease and key supplier or customer contracts.
- ✓Completion, when the price is paid, ownership passes and the handover begins.
What the sale contract needs to cover
The contract allocates risk between buyer and seller. Warranties are statements of fact about the business — for example that the accounts are accurate, that there are no undisclosed disputes, or that key contracts are in force. If a warranty turns out to be untrue, the buyer may have a claim against the seller, subject to the limits negotiated in the contract.
A restraint of trade clause protects the goodwill the buyer is paying for by preventing the seller from setting up a competing business nearby for a period. Restraints must be reasonable to be enforceable, so we draft them in layers of time and geography.
The contract should also deal with employees (who is offered employment and how accrued entitlements are handled), stock and work in progress, the transfer of phone numbers, domains and online accounts, and a training or transition period where the seller helps the buyer settle in.
Where deals go wrong
In our experience the problems are rarely about price. They arise from issues that surfaced too late: a premises lease that cannot be assigned on acceptable terms, a key customer contract that terminates on a change of ownership, or an employee entitlement that was not accounted for.
Engaging a lawyer before the heads of agreement are signed gives you the best leverage to deal with these issues — while the deal is still flexible. We coordinate closely with your accountant and broker so that the legal, tax and finance workstreams stay on the same timetable.
Common questions
How long does it take to buy or sell a small business?+
It depends on the size of the business and how quickly conditions such as finance and landlord consent are satisfied. Straightforward asset sales can complete within weeks; complex share sales with detailed due diligence take longer.
Do I need a lawyer if I am using a business broker?+
A broker markets the business and helps agree the commercial terms, but does not advise you on your legal rights. A lawyer reviews and negotiates the contract, manages due diligence and protects your position through completion.
Sources & further reading
- ↗business.gov.au — buying and selling a business
- ↗Australian Taxation Office — tax on the sale of a business
- ↗Queensland Revenue Office — transfer duty — duty on business assets
This guide is general information about Queensland and Australian law and is not legal advice. Laws change and every situation is different — speak with us about your specific circumstances before acting.
