Business Sale Agreement

What is a business sale agreement in Australia?

A business sale agreement template is a legally binding contract between the current owner and incoming owner of a business. It sets out the main conditions and terms of the sale, including price, timing, mutual rights and obligations of both parties.

There is no single uniform law in Australia governing the sale and purchase of a business.

In fact, these transactions are governed by multiple legal acts and widely depend on the relevant state or territory laws and regulations. These legal acts include applicable property acts, intellectual property acts, provisions of the Fair Work Act, Competition and Consumer Act, etc.

For instance, if in the course of a sale of a business certain property, including real estate, is transferred, parties have to consider the applicable property laws in a territory or a state where the business operates. If the company that is being sold is a public company, parties have to comply with Australian Securities Exchange Listing Rules, for example.

The parties involved in a business sale agreement Australia template are the vendor and the purchaser. Both parties to this agreement can be an individual, business or any other type of entity.

Who shall use this business sale contract?

Having a solid business purchase agreement can be helpful in various ways. A well-drafted document clarifies both parties’ expectations regarding the outcome of the transaction and provides clear milestones and payment terms. This template can be suitable for:

• Australian business owners who want to sell the business and release additional value;
• Prospective buyers and investors who need a reliable template to complete a transaction;
• Brokers and professional consultants who need a practical legal template for daily operations; and
• Startups seeking new investors and potential buyers.

This template is helpful for those business owners who sell their business as a whole. If you are planning to sell only part of the business, the share purchase agreement shall be used instead.

What does this business sale agreement template cover?

A typical business sale agreement has an extensive and complex structure. This reflects the complexity of the sale-purchase of a business as a multilayer transaction that involves tax issues, property and stock transfer, employees’ transfer, and other important things.

It is essential to note that there is no unified business sale agreement Australia template. The final document largely depends on factors such as the size of the business, the presence of employees, preconditions for the sale and other criteria.

Below is a summary of the most common provisions a solid business sale agreement example should include.

Information about the Parties

Every contract of sale business shall reflect full information about the parties being involved, including their full name, contact mailing address, ABN and ACN number if either party is a business.

It is also common to include contact information of both parties, such as email address and phone number.

Business Description

The text of the contract shall clearly outline key information about the business being sold, including:

• business name;
• short description and purpose;
• registered business address;
• ACN or ABN number, if the business is a company;
• list of assets (e.g., machinery, vehicles, real estate, etc.);
• list of employees (if applicable); and
• list of livestock (if applicable).

Last but not least, is to include any information about existing debts or pending litigations in the business’s name. If there are non, this section can simply be omitted from the final document.

Purchase Price and Payment Terms

One of the most important clauses for a contract of sale of business is the inclusion of clear payment terms. Typically, the business price is stated as a fixed sum exclusive of GST (goods and services tax in Australia). Payment terms can vary depending on the parties’ arrangement, including:

• price in instalments;
• price in full on the date of signing the sale-purchase contract;
• price in full on the completion date, etc.

In cases where the transfer of a business could take longer, for instance, when certain permits or approvals need to be obtained prior or employees transferred, the vendor may require the purchaser to pay a deposit. A deposit, also known as a security deposit, is a sum of money that is being paid to confirm the purchaser’s serious intent. If the purchaser fails to complete the transaction, a vendor can retain the deposit in full.

Competition

A purchaser may reasonably be afraid of the vendor competing with the business after the sale. If soon after a purchase a vendor launches a similar business with the same products or services, it could significantly affect the position of a purchaser’s business in the market. To prevent such unfair competition, a good business sales agreement contract can also include a non-compete clause.

Under this clause, the vendor agrees not to directly or indirectly compete with its former business on certain conditions. These conditions shall be discussed and agreed upon between the parties in advance, including:

• duration of a non-compete clause (a typical timeline for a business sale agreement in Australia is from 1 to 2 years);
• geographical limitation (e.g., competition is restricted to a state or a territory where the current business is registered or operates).

Vendor’s warranties

When a purchaser enters this business sale agreement, they have certain expectations and information about the business in question. While part of this information is usually taken from open sources such as the Internet, more sensitive information about existing financial, accounting and business affairs could only be obtained from a prospective vendor. All in all, a vendor’s warranties may play a key role in a buyer’s decision to purchase a business.

Therefore, in the text of an agreement for sale of a business, the vendor may provide the following disclaimers:

• about outstanding claims, liabilities, debts or obligations to any third parties.
• about unsatisfied orders or judgements against the vendor, the business or the assets.
• about outstanding contracts or obligations that could lead to a claim against the business.
• about outstanding notices or orders from any person, body or authority affecting the business or the assets.

Governing Law

The parties to every business sales agreement contract shall define the law of a state or territory that shall apply to the present agreement. Parties are free to choose any Australian state or territory they want. However, it is typically common to select the jurisdiction where the business that is being sold is registered or primarily conducts its operations.

What will you receive after the purchase?

Upon the purchase of this sale of business agreement template:

• Formats: You get a complete business sale agreement template in both PDF and Word editable formats.
• Australian legal compliance: The template is governed by the general provisions of contract law, as well as complies with relevant state and territory property laws, including the GST Act, Fair Work Act 2009, and Competition and Consumer Act 2010.
• Instant access: Immediate access to the customised document after the purchase.
• Ready-to-use: You can use and sign this document right after the purchase.
• Fully editable: You can change, amend or update the purchased document at any time.
• State-based requirements: The business purchase agreement reflects the specifics of the laws of a selected territory or state.
• Reduced Legal Costs: A document drafted by professional lawyers for the price of a coffee.

How to customise an agreement of purchase and sale of business with FasterDraft?

To get a fully customised legal document template, follow a few easy steps below:

1. Click the “Create Document” button.
2. Answer simple questions in the form.
3. Select a template’s format – small business sale agreement PDF or Word.
4. Make a payment.

Your fully customisable document is ready for instant download and use.

Full checklist for signing a sales and purchase agreement for business in Australia

Once the document is ready, you may be wondering what to do next. Below is a short checklist of the most important steps to follow after the purchase of the business sale contract template.

Read the Document

It is essential that both parties read the final document carefully. There is no need to rush so that both parties can get enough time to understand all the provisions and details. Ensure the following information is reflected correctly:

• identification details of the parties involved;
• information about the purchase price and payment deadline;
• details of any existing debts or pending litigation in the business’s name (if any).

Last but not least is to check the legal authority of the parties signing the agreement. If either party is acting by proxy, check the ordering of their power of attorney. If the party is a business entity or a company, check their corporate documents to ensure the representative has the authority to sign this sales and purchase agreement for business.

Sign the Document

The next stage is signing a contract for sale of business. Each party must put their signature. The signature can be put either by hand or using e-signature tools available online. Australian laws do not require this document to be further notarised.

This contract shall be signed in at least two copies – one copy per party. Each party shall keep that copy for their internal record.

Please note that a signed business purchase agreement is the first legal proof of the parties’ transaction, so it should be handled with care.

Meet all the pre-sale conditions

A typical contract of sale of business Australia template includes the list of important conditions each party has to fulfil to complete the transfer of business.

For example, the vendor can be required to provide physical access to the business’s premises to the purchaser’s accountants to check all the financial documentation prior to the completion date. Alternatively, the purchaser may need to secure additional financing to be able to finalise the purchase, including taking the loan.

The business can be transferred from the vendor to the purchaser only upon the fulfilment of all necessary conditions.