Selling Your Business in Victoria: A Legal Checklist
Selling a business is one of the most significant financial transactions a business owner will undertake. The legal process is complex and involves multiple parties — lawyers, accountants, brokers, and financiers. This checklist covers the key legal steps in a Victorian business sale.
Prepare your business for sale
Before engaging a broker or approaching buyers, ensure your financial records are up to date and accurate, your leases and contracts are in order, and any intellectual property is properly registered. Buyers and their advisers will conduct thorough due diligence, and gaps in your records will raise concerns.
The heads of agreement
Once a buyer is found, the parties typically sign a heads of agreement (also called a letter of intent or term sheet) setting out the key terms of the deal. This document is usually not legally binding, but it sets the framework for the formal contract. Legal advice at this stage can prevent problems later.
The business sale contract
The formal contract of sale sets out all the terms of the transaction, including the purchase price, the assets being sold, the treatment of employees, restraint of trade provisions, and conditions precedent. The contract should be drafted or reviewed by a lawyer experienced in business sales.
Restraint of trade
Most business sale contracts include a restraint of trade clause preventing the vendor from competing with the business for a specified period and within a specified geographic area. The enforceability of restraint clauses depends on whether they are reasonable in the circumstances. Legal advice is essential.
Employee entitlements and TUPE
If the business has employees, the sale must address their entitlements. In Victoria, employees may have the right to have their service recognised by the new owner. The contract should clearly allocate responsibility for outstanding leave entitlements and other employee obligations.
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