Compulsory Legal Disclosures When Selling a Business
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 requires disclosure, under the Estate Agents Act 1980 (Vic) and its regulations. On the sale of a small business, the seller must give the buyer a statement in the prescribed form, known as a section 52 statement, signed by the seller. It contains disclosures mainly about the financial position of the business over the previous two years. A business is a small business if its goodwill, plant, equipment and fittings are sold for a total price within the limit set under the Act and its regulations. The statement is usually prepared by the seller’s accountant rather than the business broker, but it is usually the broker who gives it to a prospective buyer. It must be given before the buyer signs the contract or pays a deposit. If it is not given, or is inaccurate, the buyer may avoid the contract by written notice within three months after signing and before taking possession.
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.
Selling your business? See Selling a Business in Queensland.
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Disclaimer: This article is general information only and is not legal advice. Before acting on it, get advice on your own circumstances. To the extent the law allows, Kafrouni Law accepts no liability for any loss arising from reliance on it. This article is the copyright of Kafrouni Law.
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