Buying a Business Lawyers in Melbourne

Buying an established business can save you years. It also means taking on its history, and the seller knows that history far better than you do. A lawyer’s job is to check it before you’re committed.

If you’re buying a business in Melbourne or regional Victoria, our business lawyers carry out the legal due diligence and review the contract of sale, so you know what you’re getting, what you’re not, and what could follow you after settlement. Your accountant tests the numbers. We test the rest.

You might be buying your first business, adding one to a business you already run, or taking over from a family member or a former employer. Either way, you are relying on what the seller tells you, so we check it against the records, the registers and the documents. Our principal, David Henderson, has nearly 40 years’ experience. Selling rather than buying? Our selling a business page is written for you.

Seven questions to answer before you sign

Does the seller own what they’re selling?

We search ASIC’s registers for the seller’s company, its officeholders and the business name, so you know who you’re dealing with and whether they can sell. We also ask who owns the trade marks, domain names, website and software. A business name registration doesn’t give anyone exclusive rights to the name. A registered trade mark does.

Is anyone else owed money over the assets?

The Personal Property Securities Register (PPSR) is the national register of security interests over personal property such as stock, equipment and vehicles. We search it against the seller and, for vehicles, by serial number. A registration can mean a lender or supplier has rights over an asset, and you want to know that before you pay for it.

Can you keep the premises?

For a lot of businesses, the lease is most of the value. We check the remaining term, the options, the rent and any guarantees, and whether the landlord has to consent to the lease being assigned to you. If the premises are retail premises under the Retail Leases Act 2003 (Vic), a seller of an ongoing business must give you the disclosure statement and three years of business records. The landlord can only refuse consent on limited grounds, including doubts about your financial resources or business experience, so be ready to show both. A short remaining term can change what the business is worth, and our commercial leasing lawyers can review the lease in detail.

What comes with the staff?

Under the Fair Work Act 2009 (Cth), employees who move to you in a transfer of business generally keep their service for many entitlements. Depending on how the deal is structured, you may take on their accrued annual leave, or the seller may pay it out. Long service leave is different in Victoria. Victorian Government guidance says that when an employee stays on, the new owner becomes responsible for their long service leave, including their years with the seller, and a sale contract can’t exclude that. We make sure each entitlement, including any unpaid super, is identified and reflected in the price. Our employment lawyers can advise on the staff you’re taking on.

Which licences go with the business?

Some licences, permits and registrations can be transferred to a new owner. Others have to be applied for again. We help you work out what the business needs and, where it makes sense, make the sale conditional on getting them.

Will the key contracts survive the sale?

Many customer and supplier contracts can’t be assigned without consent, or let the other side end the contract when ownership changes. If the income you’re paying for depends on those contracts, we find those clauses first.

Is there anything the seller hasn’t mentioned?

We ask for a list of current and threatened disputes, customer complaints and warranty claims, and we read what we’re given. We also check what debts and liabilities the contract leaves with the seller, and ask for evidence that tax, super and supplier accounts are up to date. If something turns up, our litigation and debt collection and insolvency lawyers can look at it before you decide.

Reading the contract of sale

There is no single contract every Victorian business sale must use. Whatever the seller’s side sends, we look at:

• what is included and what is left out, from stock and equipment to goodwill, intellectual property and contracts
• the seller’s warranties, and whether they cover the risks the due diligence turned up
• conditions for finance, landlord consent, licences and due diligence, with clear dates and a clear way out if one fails
• the seller’s restraint of trade: how long it lasts, where it applies and what it covers
• who holds the deposit, and what happens if either side doesn’t settle

The section 52 statement

For a smaller business (goodwill, plant, equipment and fittings selling for $450,000 or less, not counting any liquor licence), section 52 of the Estate Agents Act 1980 (Vic) requires the seller to give you a signed statement about the business before you sign or pay a deposit. Consumer Affairs Victoria’s form says that if the statement is incomplete or inaccurate, you may be able to avoid the contract within three months of signing, as long as you haven’t taken possession. We check the statement against the records. If land is included, a section 32 vendor statement is also needed before you sign.

No general cooling-off period

Buying a business generally comes with no cooling-off period. Any right to pull out after signing depends on what the contract says, which is the best reason to have it reviewed before you sign. If land is part of the deal, different rules may apply to that part, so ask us.

Settlement, and where your accountant fits in

At settlement the price is adjusted for stock on hand, prepaid income, rent, outgoings and staff leave. We check each calculation, and that the consents, keys, passwords and records are ready to hand over. If you’re keeping the business name, the seller starts the transfer with ASIC and gives you a transfer number to register it. A trade mark passes to you under a signed assignment.

Bring your accountant in from the start. Financial due diligence, valuation, tax and GST, and the choice between buying shares or assets are accounting questions, and we don’t give tax advice. If you’re borrowing to buy, the lender may want security over the business, and our finance and securities lawyers can review the loan documents.

Warning signs worth a call to a business purchase lawyer

• The seller wants a signature this week.
• You can’t get a copy of the lease, the records or the staff details.
• The accounts, the contracts and the registers tell different stories.
• You have an offer or heads of agreement in front of you. Depending on its terms and the circumstances, it may already be binding.
• You’ve signed and now have doubts. Move quickly, because time limits can apply.

This page is general information, not legal advice. Every purchase is different, so get in touch about yours.

Buyer questions

How it works

1. Call (03) 9629 2211 or fill in our online enquiry form. Tell us about the business you have in mind and send any offer, contract or lease you’ve been given.
2. We clarify your instructions and take a first look at what you’ve sent.
3. We prepare a costs agreement and disclosure statement covering the scope and our fees.
4. Once you accept, we start the due diligence and keep you updated as the results come in.