What a Buyer's Due Diligence Will Find in Your Business

When you sell your business, the buyer's lawyer and accountant go through it before the buyer commits. What they find shapes the price, the warranties you give and sometimes whether the deal goes ahead at all.

Most of what they'll find, you can find first.

How it works

The buyer sends a list of questions and asks for documents, usually through an online data room. Each problem they find becomes a price reduction, money held back from the price, a specific indemnity or a condition of the deal. A problem you've fixed, or disclosed up front, costs less than one the buyer finds halfway through.

These are the areas a buyer will look at, and the gaps I see most often.

1. Company records

The buyer starts with the company's register of members and its minute books (Corporations Act 2001 (Cth), ss 168, 169 and 251A), and compares them with ASIC's records. Share issues, transfers and dividends with no signed minutes, or a register that doesn't match ASIC, usually have to be fixed before completion.

2. Contracts

The buyer will read your key customer, supplier, finance and licence contracts for:

1. Change of control clauses, which let the other party end the contract if the company is sold.
2. Contracts that are unsigned, expired, or with a different entity from the one being sold.
3. Big customers on short notice periods or a handshake, because that revenue isn't locked in.

In a sale of the business assets, rather than the shares, most contracts need the other party's agreement before they pass to the buyer.

3. Employees and super

Employee entitlements are often where the money is.

1. On an asset sale, staff who join the buyer within 3 months to do the same work are usually "transferring employees" (Fair Work Act 2009 (Cth), s 311), and their service generally counts as service with the buyer (s 22(5) and (7)). A buyer that isn't an associated entity can refuse to recognise it for annual leave, and then you pay the leave out (s 91).
2. Long service leave in Queensland continues across a transfer of the business (Industrial Relations Act 2016 (Qld), s 132). In a business that has traded for 10 years or more, it's often the largest staff liability, and it's usually dealt with as an adjustment to the price.
3. Underpayments are a bigger issue than they used to be. Since 1 January 2025, intentionally underpaying wages and certain other entitlements is a criminal offence (Fair Work Act, s 327A).
4. Super: from 1 July 2026, super guarantee contributions will generally be due within 7 business days after each payday, not quarterly (Treasury Laws Amendment (Payday Superannuation) Act 2025 (Cth)). A buyer will then be able to check compliance pay by pay.

Award classification errors and contractors who are really employees are among the most common findings.

4. Security interests

The buyer will search the Personal Property Securities Register. Registrations over what's being sold usually need to be released at completion, including old ones from finance you repaid years ago.

The search also works the other way. If you sell goods on retention of title, or hire out equipment for longer periods, your interest may need to be registered to protect you if a customer becomes insolvent. An unregistered interest can vest in the insolvent customer (Personal Property Securities Act 2009 (Cth), s 267).

5. Intellectual property

The buyer will check that the company owns what it uses. Employees' work done as part of their job belongs to the employer (Copyright Act 1968 (Cth), s 35(6)). A contractor's work doesn't, unless the contractor has assigned it in writing (s 196(3)). The trade mark, if there is one, is often registered to a founder rather than the company.

6. The premises lease

The lease is often the contract a buyer cares about most: how long it has to run, the rent, and whether it can be assigned or allows a change of control.

For a retail shop lease, you must give the buyer a disclosure statement and a copy of the lease at least 7 days before the earlier of signing the sale contract and asking the landlord to consent to the assignment (Retail Shop Leases Act 1994 (Qld), s 22B). Get that statement right. On assignment, the Act releases you and your guarantors from liability for the buyer's later defaults, but only if you complied with s 22B and the statement isn't materially incomplete, false or misleading (s 50A).

7. Privacy

The small business exemption from the Privacy Act applies only if your turnover is $3 million or less, and once your business has had a year above $3 million, it doesn't come back (Privacy Act 1988 (Cth), s 6D). If a business is past that, the buyer will want to see a privacy policy and some evidence that customer data has been handled lawfully, particularly if the customer database is part of what they're buying.

8. Licences, permits and claims

Some licences and permits are issued to a particular holder and don't pass on an asset sale, so the buyer has to apply for its own. The buyer will also ask about current and threatened claims and search the courts and ASIC's published notices.

Do it before you go to market

Everything above can be checked before a buyer is involved. That's the point of reviewing your business before you sell: you look at it the way a buyer will, before a buyer does. You then fix what you can, and disclose what you can't on your terms.

If you're thinking about selling in the next few years, you can book a consultation with me to work out where your business stands.

The law in this article is stated as at 2 June 2026.

Joe Kafrouni, Director and Accredited Specialist (Business Law), Kafrouni Law

Disclaimer

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

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