Compulsory Legal Disclosures When Selling a Business

Joe Kafrouni

01 Sep 2012

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min read

In some States, the law requires that the buyer of a business be provided with certain information when entering into a business sale contract.

Queensland law does not prescribe a disclosure statement for the sale of a business on its own. If the sale includes freehold land, the seller must give the buyer a disclosure statement and the prescribed certificates before the buyer signs the contract (Property Law Act 2023 (Qld) s 99).

In South Australia, the seller of a small business must serve a vendor’s statement (Form 2) on the buyer at least five clear business days before settlement (Land and Business (Sale and Conveyancing) Act 1994 (SA) s 8(1)). A small business is one sold for $300,000 or less, excluding GST, unless a regulation fixes another amount (s 4(1)). Sellers often give it earlier, with the information memorandum.

Victoria also has certain disclosure is mandated pursuant to the Estate Agents Act 1980 (Vic) and the Estate Agents (Contracts) Regulations 2008. The seller must provide a Section 52 – Statement for any sale involving a small business. It contains disclosures predominantly about the financial position of the business over the previous two years. A small business is any business being sold for up to $350,000. This statement is not drafted by the business broker and is usually drafted by the seller’s accountant. However, it is usually the business broker who issues the Statement to a prospective buyer. This must be done before the contract of sale is signed or a deposit is paid.

Sellers and business brokers must comply with these requirements when a business is sold in South Australia or Victoria. In Queensland, check whether the sale includes freehold land.

Joe Kafrouni, Legal Practitioner Director, Kafrouni Lawyers

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The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. You should always consult your own legal advisors to discuss your particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

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