6 Laws You Need to Understand When Buying or Selling Businesses in Australia

By: Guest
March 31 2018

6 Laws You Need to Understand When Buying or Selling Businesses in Australia


Perhaps you’re considering purchasing an established business or maybe you’ve had an offer from someone to purchase your own company, such that you are considering whether or not to sell your business.  Either way, there are a number of laws and regulation which need to be followed prior to the sale.


Failure to adhere to these rules can results in all manner of difficulties, including the sale being invalid by law. Therefore, it’s essential that you do your research and have all documentation in order before signing the deal. There are many aspects to think about, but read on for seven of the main points you’ll need to consider when buying or selling a business.


Minimum Three Years Financial Information


If your selling your own business, then you will need to provide both quarterly and annual financial information to the prospective buyers. This includes all balance sheets, cash flows, income statements and footnotes. You can also ask for financial projections, accounts receivable aging schedule, company and industry pricing policies and a risk management plan. The buyer has the right to have access to all of these documents, so make sure that you have them ready to view. The same applies when it comes to purchasing a business – ensure that you have all the financial data you need to form a clear picture.

Sell your business

Capital Structure Information


You’ll also need a detailed breakdown of the structure of the business. This can include things like the current outstanding shares along with a list of all the stock holdings, share opening and notes. Remember to ask for a liabilities sheets as well as overviews of bank loans and terms and conditions.


Legal Matters


By law, the business owner needs to provide you with detailed information regarding past and present legal matters, so that you’re not left with any nasty surprises. Request full overview on pending and past lawsuits and their outcomes, as well as employee safety, potential environmental issues, licenses, trademarks and patents as well as details on insurance cover. If you’re selling your business make sure all this information is easy accessible for the buyer.


Considering Capital Gains Tax


If you’re selling your company, you may be required to pay a capital gains tax on the money from the sale or any assets that you keep. Seek advice of a company law specialist if you are unsure. There is a possibility if you do have to pay capital gains tax, that you can get a reduction on the total amount depending on your options and what your government allows.


Selling Shareholdings


If you own a limited company, and you are planning on selling the entire shareholdings to a new buyer, then avoid resigning yourself as a director first. What you will actually need to do is to appoint both new directors and shareholders prior to resigning. Again, this is a relatively easy process, but you will want to make sure that you have all legal paperwork signed and dotted before you choose to do this.


Employee Consideration


While all effort is placed on providing the buyer with the correct information as well as making sure all the right contracts and papers are being signed, you’ll also need to carefully consider the rights of current employees. Make sure they are in the loop of both when and why the company is being sold. If they are being made redundant, then you will need to provide adequate notice as well as details on redundancy packages. If the new business owner wants to keep on existing employees, then you will still need to keep your employees up to date with the expected changes. Being honest and clear with your employees will serve you well in the long run.


Follow the above tips and you will be well on your way to buying or selling a business legally. However, there are also a number of other points you’ll need to consider, so you may want to hire a lawyer to make sure there is nothing that you are missing. Legal help could save you plenty of time and money in the long run. Good luck.


This is a guest post by Cassie Phillips. This post has been edited for syntax and grammar.  The Law offices of Jay Leiderman is not responsible for the accuracy of the content herein or any opinions or ideas expressed herein.  This post is for entertainment and literary value and is not intended as legal advice.  This post does not establish an attorney-client relationship of any sort.  If you have legal questions about ideas presented herein please contact a lawyer knowledgeable in this field of practice.

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