Selling a business in Australia is a significant commercial transaction that requires careful legal planning and compliance with both federal and state laws. Whether you are a small business owner or managing a larger enterprise, understanding the legal requirements is crucial to ensuring a smooth transfer, minimising risks, and maximising sale value.
This guide, prepared by our M&A legal team, explains the critical legal steps, contract essentials, and compliance obligations every vendor should know before proceeding with a business sale.
Key Takeaways
Ensure all company records and legal documents are current before listing your business.
The contract of sale must detail assets, liabilities, warranties, and employee arrangements.
Employee transfers are governed by the Fair Work Act 2009 (Cth) and require clear treatment of entitlements.
Intellectual property must be assigned properly and protected with confidentiality clauses.
GST and state duties may apply depending on the sale structure.
Compliance with the Competition and Consumer Act 2010 (Cth) is essential to avoid legal pitfalls.
A well-managed settlement ensures a clean transfer of ownership and minimises post-sale risks.
1. Preparing Your Business for Sale: Legal Due Diligence
Before listing your business for sale, it is essential to ensure all company documents and records are accurate and current. This step not only streamlines the transaction but also builds buyer confidence and reduces the risk of post-sale disputes.
Key Documents to Prepare
ASIC company extract with updated directorship and ownership details
Contracts which, depending on the type of business, may include supply and distribution contracts, leases and loan agreements
Again this is depending on the type of business but may include relevant trade marks, patents or unregistered intellectual property
Employment contracts and PAYG/superannuation compliance documents
Asset register and PPSR searches to identify encumbrances
Proof that the business holds appropriate licences and consents
2. Terms to include in a Contract of Sale
A well-drafted contract of sale is the foundation of a successful business transfer.
Key Elements
Assets being sold: goodwill, inventory, plant, equipment, and intellectual property
Purchase price: structure, deposit conditions, and payment schedule
Warranties: statements about the business’s condition, finances, and known liabilities
Adjustments: including stock valuation and financials up to the settlement date. Consider whether an earnout arrangement might be appropriate.
Restraint of trade: preventing the seller from competing post-sale within a reasonable time and area
3. Handling Employees and Entitlements
If the buyer is taking over staff, the sale must address how employee rights and obligations will transfer.
Employee Considerations
Prepare a schedule of transferring and non-transferring employees
Decide whether leave entitlements will be paid out or transferred
Address continuity of service for those moving to the new owner
Comply with the Fair Work Act 2009 (Cth) to avoid liability or claims
4. Protecting IP and Confidential Information
Your business’s value often lies in intangible assets like IP, brand recognition, and know-how.
Protecting Your Business IP
All intellectual property (IP) and business names must be lawfully assigned to the purchaser. Sale documents should include:
- Clear identification of all IP assets
- Proper assignment documents for IP Australia registration
- Confidentiality covenants restricting disclosure of sensitive business information except where legally required
5. Tax, GST, and State Duties
Understanding the tax impact of the sale is essential to avoid surprises later.
Key Tax Considerations
The sale may qualify as a GST-free “going concern” if certain conditions are met
Stamp duty may apply to leases, goodwill, or intellectual property in some states
Consider capital gains tax (CGT) implications and available concessions for small business owners
6. Competition, Consumer and Regulatory Compliance
Under the Competition and Consumer Act 2010 (Cth), vendors must not mislead buyers or engage in anti-competitive behaviour during the sale process.
Avoiding Legal Pitfalls
Vendors must ensure compliance with the Competition and Consumer Act 2010 (Cth), which prohibits anti-competitive conduct, cartel behaviour, and misleading representations in connection with the sale.
Businesses should:
Ensure all representations and warranties are accurate
Avoid misleading or deceptive conduct in business summaries or promotional materials
Review limitation of liability clauses for compliance with consumer law
7. Final Settlement and Completion Checklist
At settlement, all legal and practical items must be finalised to complete the sale.
Final Settlement Tasks
Transfer of keys, passwords, logins, domain names, and access credentials
Serve assignment or novation notices to third parties (e.g., landlords, suppliers)
Lodge required ownership/director changes with ASIC
Confirm IP transfers and licence handovers
Pay out remaining liabilities and deliver a clean title
Notify employees and stakeholders of the transfer
If you are considering selling your business or need advice on preparing for a business sale in Australia, contact our team today to ensure your transaction is legally compliant and risk-free.
If you’re buying a business, discover the 10 things to consider before buying a business in our article.
Frequently Asked Questions
What documents must I prepare before selling my business in Australia?
Prepare ASIC extracts, major contracts, IP register, employment records, asset registers, and evidence of licensing compliance.
Do I need to pay GST when selling my business?
GST may not apply if the sale qualifies as a ‘going concern’, but this depends on meeting specific legislative requirements.
How are employee entitlements handled in a business sale?
You must address accrued leave and continuity of service for transferring employees as required by the Fair Work Act 2009 (Cth).
Learn more about Employment Law Considerations when selling a business in our article.
What are restraint of trade clauses and are they enforceable?
Restraint of trade clauses restrict the vendor’s ability to compete after sale. They must be reasonable in duration and area to be enforceable.
Who is responsible for updating ASIC records after settlement?
The parties must lodge relevant documents with ASIC to reflect changes in ownership and directorship as part of completion.
