Buying or selling a business usually involves several moving parts at once: a contract, a lease, staff, suppliers, licences, finance and tax. Any of them can delay completion or change the price if it is left late.
Many of the families we work with buy and sell across borders. This article outlines in general terms, under Victorian and Commonwealth law, the issues that tend to arise. Separate articles discuss buying commercial property and retail leases.
Consider a hypothetical family that agreed through a broker to buy a Melbourne café group run through a company. The family assumed they were buying the business assets; the vendor expected to sell the shares. The landlord had not been asked to consent, key staff held sponsored visas, and part of the price was coming from relatives overseas. The right approach depended on facts that needed advice.
Letters of intent and heads of agreement
Deals often begin with a letter of intent or heads of agreement covering price, structure, timing and key conditions. A recurring issue is whether it is binding. Confidentiality, exclusivity and costs clauses are often meant to bind while the commercial terms are not. Unclear wording may leave a party bound earlier than expected, or free to walk away.
Share sale or asset sale
In a share sale, the buyer acquires the company that owns the business, with its history, contracts and liabilities, known and unknown. In an asset sale, the buyer acquires chosen assets, such as goodwill, equipment, stock, intellectual property and the benefit of contracts, and the seller usually keeps the company. The choice can affect risk, which contracts need consent to transfer, the scope of due diligence, the employees’ position, duty, GST and capital gains tax.
Due diligence
Areas commonly reviewed in due diligence include:
- Leases: term, options, rent reviews, permitted use and make-good.
- Employees: contracts, award or agreement coverage, correct pay, accrued leave and visa status.
- Contracts: key customers and suppliers, change-of-control and termination clauses.
- Intellectual property: who owns the name, trade marks, website, recipes, software and social media accounts.
- Tax: lodgement history and, in a share sale, the company’s past tax positions.
- Licences: liquor, food, planning and industry permits, and whether they transfer.
- Security interests: registrations on the Personal Property Securities Register.
The business broker’s role
In Victoria, a person who sells or buys a business on behalf of others for reward generally needs an estate agent’s licence under the Estate Agents Act 1980 (Vic), the same framework that licenses real estate agents, subject to exemptions. A broker usually acts for and is paid by the vendor, so even a helpful broker is not the buyer’s adviser. A signed broker’s contract may be binding, and questions can arise about commission and whether an unlicensed intermediary is entitled to be paid.
Warranties, restraints, earn-outs and vendor finance
Warranties are the seller’s promises about the business, such as accurate accounts and no undisclosed disputes. Their value depends on how they are limited, how long claims may be brought, and whether the seller will have assets to meet a claim.
A restraint stops the seller competing for a period and within an area. Victorian courts generally apply the common law test of reasonableness, which is why restraints are often drafted as cascading alternatives. The Commonwealth has released exposure draft legislation to ban many employee non-compete clauses, expected to start in 2027 if passed. The draft does not appear to cover restraints given by a seller to protect goodwill, but proposed no-poach rules may affect related terms about the business’s staff. The bill is not yet law, and the final legislation will need checking.
An earn-out ties part of the price to future performance. It can bridge a gap in expectations but may lead to disputes about how results are measured, and particular tax rules may apply. Vendor finance raises questions of security, guarantees and default.
Transferring the lease
Where the Retail Leases Act 2003 (Vic) applies, it sets rules for assigning the lease, including the information the outgoing tenant must give, the grounds on which the landlord may refuse consent, and when the outgoing tenant and guarantors may be released. Otherwise the lease terms largely govern. Landlord consent is a common cause of delay.
Employees
In an asset sale, employment with the seller ends and the buyer may offer employment. The transfer of business rules in the Fair Work Act 2009 (Cth) can carry across certain instruments and entitlements, and whether prior service is recognised can affect leave, redundancy and unfair dismissal rights. In a share sale the employer does not change, so liabilities stay with the company. Sponsored visas raise their own issues.
Completion
Completion involves adjustments, release of securities and handover of records. Where funds come from overseas, the transfer must comply with the laws of the country the money leaves and of Australia. Banks may ask about the source of funds and wealth, and since 1 July 2026 many lawyers, accountants and real estate professionals have anti-money laundering obligations for certain transactions, including some sales of entities.
GST and the going concern exemption
A sale of a business may be GST-free as the supply of a going concern. In general terms, the seller must supply everything needed for the business to continue and carry it on until the day of sale, the buyer must be registered or required to be registered for GST, and the parties must agree in writing that the sale is of a going concern. If a condition fails, GST may be payable. Capital gains tax, the small business concessions and the CGT changes from 1 July 2027 may also matter. These are questions for a qualified tax adviser working with the lawyer.
Lessons from running businesses
Justin Chua has owned and operated businesses, including in hospitality and accommodation, and has run a real estate agency. That experience shapes the questions we ask. The issues that cause trouble after completion are often practical: whether key staff stay, whether supplier terms were personal to the old owner, whether online accounts transfer, and how much of the turnover depended on the vendor personally. A contract can deal with these only if they are raised before signing.
Questions to discuss with your adviser
- Which parts of the heads of agreement are intended to be binding?
- Is a share sale or an asset sale more suitable, and why?
- Will the landlord, key customers or licensing authorities need to consent?
- How are employees, their entitlements and any visas being dealt with?
- Does the sale qualify as a going concern?
Frequently asked questions
Do I need a lawyer to buy a business in Melbourne?
There is no legal requirement, but the contract, lease and employee issues can be complex, and the broker usually acts for the vendor.
Does a business broker need a licence in Victoria?
Generally, yes. A person who buys or sells businesses for others for reward needs an estate agent’s licence under the Estate Agents Act 1980 (Vic), subject to exemptions. Consumer Affairs Victoria keeps a public register of licensees.
Is the sale of a business GST-free?
It may be, if it qualifies as the supply of a going concern and the conditions are met. Otherwise GST may apply.
Every family’s situation is different, and the answer often turns on details. Book a consultation so we can review your documents and circumstances before you act.
How Chua Tan Associates can help
Chua Tan Associates has practised in Melbourne since 1990 and acts for buyers and sellers of businesses, including families with relatives and funds in Asia. Our commercial work draws on a broad library of contract precedents that we adapt to each deal, and we work alongside the client’s accountant, broker, financier and migration lawyers, including our colleagues who are Accredited Specialists in Immigration Law, and with lawyers overseas. Justin Chua trained in accounting (Bachelor of Commerce, accounting major), worked in finance in Hong Kong before law, is a licensed real estate agent and has run businesses of his own. He is an Accredited Family Business Advisor and a Nationally Accredited Mediator, and the firm advises in English, Mandarin and Cantonese.
Important: This article is general information only and must not be relied on. It is not legal, tax or financial advice, does not take your circumstances into account, and may not reflect changes in the law after publication. Laws of other countries may also apply. Do not act or refrain from acting on the basis of this article. Reading it or contacting us does not create a lawyer–client relationship. Please book a consultation for advice on your situation.
Related reading
Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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