Buying or Selling a Business in Australia: Legal Risks Explained
Commercial and Corporate Law in Australia plays a crucial role in business transactions. Whether you are buying or selling a business, understanding your legal obligations is essential to avoid costly mistakes.
Why Legal Advice is Crucial
Purchasing or selling a business is not as simple as signing an agreement and handing over money. These transactions involve complex legal requirements under Commercial and Corporate Law, which ensure both parties’ interests are protected. Without proper legal guidance, you could face hidden liabilities, compliance breaches, or financial losses.
Due Diligence—Know What You’re Getting Into
Due diligence is one of the most critical steps in any business sale or purchase. For buyers, this means thoroughly investigating the business before committing to the deal. Key checks include:
Reviewing financial records for accuracy and outstanding debts
Assessing existing contracts with suppliers and customers
Checking compliance with tax and regulatory obligations
Investigating any pending litigation or disputes
For sellers, preparing for due diligence can help you achieve a higher sale price and avoid last-minute deal collapses.
Understanding the Sale Agreement
The business sale agreement is the backbone of the transaction. It should clearly outline:
The assets being sold (equipment, intellectual property, goodwill)
Transfer of employees and employment obligations
Conditions for settlement and payment terms
Warranties and indemnities to protect against undisclosed liabilities
Both parties should engage experienced Commercial and Corporate Law professionals to draft and review this agreement.
Transfer of Licences and Permits
Some businesses require specific licences or permits to operate. Buyers need to confirm these can be legally transferred or re-applied for after the sale. Failure to do so could mean buying a business you cannot legally operate.
Employee Rights and Obligations
When a business changes hands, employee entitlements such as annual leave, long service leave, and redundancy must be addressed. Buyers and sellers should negotiate who takes responsibility for these obligations and ensure compliance with Fair Work requirements.
Taxation and GST Considerations
Business sales often attract GST, but exemptions apply if the sale qualifies as a ‘going concern’. Both parties should seek tax advice to ensure correct GST treatment and avoid unexpected liabilities.
Non-Compete Clauses
Buyers usually require the seller to agree to a non-compete clause, preventing them from starting a similar business nearby for a certain period. These clauses must be reasonable to be enforceable under Australian law.
Intellectual Property and Brand Protection
Ensure the sale agreement includes all intellectual property (IP) associated with the business, including trademarks, copyrights, and domain names. Omitting IP can lead to disputes later.
Regulatory Compliance
Australian businesses must comply with laws on consumer rights, privacy, and workplace health and safety. Buyers should confirm compliance before settlement to avoid future penalties.
The Role of Legal Experts
Engaging an experienced Commercial and Corporate Law solicitor ensures your transaction complies with all legal obligations and protects your interests. From conducting due diligence to drafting airtight agreements, legal professionals can prevent costly mistakes.
Thinking of buying or selling a business? Our expert Commercial and Corporate Law team can guide you through every step—ensuring compliance, minimising risk, and securing your best outcome.
