Business Due Diligence in Australia: A Complete Legal Guide

Due Diligence and Transaction Structure

Structure drives scope. On a share sale the buyer acquires the shares in the company; the company keeps its assets, contracts, employees, licences and liabilities, and the buyer takes economic and control exposure to the company's history — including tax positions and contingent liabilities that nobody has yet identified. Diligence is ordinarily wider on a share sale and reaches further back, although the actual scope in either structure depends on the target, the assets, the jurisdictions involved and the risks identified. On an asset sale the buyer acquires identified assets and rights and assumes only the agreed liabilities, subject to statutory, employee, tax, environmental, successor and third-party issues. Diligence narrows to title to those assets, the transferability of key contracts, the treatment of registered security interests, the employee position and the duty and GST analysis. The structural comparison itself is set out in Share Sale vs Asset Sale in Australia.

Scope, Materiality and Process

Red-flag review or full scope

There is no universal due diligence scope. A red-flag review is confined to agreed high-risk areas and reports only issues above an agreed threshold; it is quicker and cheaper and is often used before exclusivity or on smaller transactions. A full-scope review covers each workstream and reports systematically. Many transactions run a red-flag phase first and expand scope only where the first phase justifies it. The choice is a commercial one, driven by price, structure, industry, funding requirements and the buyer's risk appetite.

Materiality, assumptions and exclusions

A disciplined engagement fixes, in writing and at the outset:

• the materiality threshold for reporting an issue, and any lower threshold for particular categories such as tax or employment;
• the lookback period for each workstream;
• the assumptions the reviewer is entitled to make — for example that documents provided are complete and authentic;
• the exclusions — jurisdictions, subject matter or entities not reviewed;
• a responsibility matrix allocating each workstream to legal, financial, tax, valuation or specialist advisers so nothing sits between two engagements; and
• the form of deliverable — a written report, an issues list, an exceptions-only memorandum or a verbal briefing.

Issue lists, Q&A and reporting

Working process matters as much as scope. A single running issues list, with an owner and a status against each item, keeps the workstreams aligned. Questions should go through a recorded Q&A channel rather than informal calls and messages. A maintained Q&A record preserves what was asked, what was answered and what was disclosed. What legal significance that has is a separate question: it depends on the transaction documents, including any entire-agreement or non-reliance provisions, whether an answer amounts to a representation, the Australian Consumer Law, equity and the general law, and — where required — proof of actual reliance and causation. Escalation criteria should be agreed — which issues stop work and go to the buyer immediately — and the final written report should state its scope, assumptions, exclusions and date, and separate findings from recommendations.

The limits of due diligence

Due diligence reduces risk; it does not eliminate it. It is based on documents and answers the seller chooses to provide, on searches with known limits, and on a snapshot in time. Fraud, deliberate concealment, unrecorded oral arrangements, latent contamination, undocumented practice and events after the cut-off date may all sit outside it. Residual risk is a reason to think carefully about warranties, indemnities, retention and — in the right case — whether to proceed at all.

NDA, Data Room and Information Governance

Confidentiality before disclosure

A confidentiality agreement should be in place before the seller discloses anything beyond high-level information. It usually deals with permitted purpose, permitted recipients, the treatment of derived material, return or destruction, the position on residual knowledge, and the duration of the obligation. Where employees, customers or suppliers do not yet know about the transaction, the agreement will often restrict contact with them.

Running the data room

An organised data room is in both parties' interests. Practical controls include staged access that opens more sensitive folders later in the process, per-user permissions, download and print restrictions where appropriate, a maintained index with document numbering and version control, and a Q&A log that ties each question to a numbered answer and to the documents provided in response.

Sensitive, personal and regulated information

Not everything in the business should go into the data room in original form. Commercially sensitive material such as customer-level pricing, personal information about identifiable employees or customers, and regulated information such as health records call for restraint. The practical answers are data minimisation, aggregation, redaction and de-identification, with identified detail disclosed only where genuinely necessary and only to named recipients. Where competitors are involved, a clean team — a defined group who may see competitively sensitive information and who are barred from operational decision-making — with a written protocol is the usual approach, and it should be set up before the information moves rather than afterwards.

Legal professional privilege

Disclosing privileged documents may waive privilege, or at least create a dispute about whether privilege has been waived, and no contractual label reliably prevents that. Where privileged material is genuinely relevant — a live dispute, an investigation, an internal review — options include redaction, a summary prepared for the purpose, controlled review arrangements, and confidentiality or common-interest arrangements where they are legally available on the facts. Specific advice should be taken before privileged material is uploaded.

Preserving the record

What was actually disclosed, and when, may matter a great deal if a warranty claim follows. A full copy of the data room as at the relevant date, the index, the Q&A log and an activity report showing what was made available are worth preserving in a form that can be produced later.

Vendor due diligence and reliance

Sellers sometimes commission their own vendor due diligence reports and make them available to bidders. These reports are prepared for the seller and normally identify permitted recipients and contain scope limitations, assumptions and express non-reliance terms. A buyer can read such a report and take commercial account of it. Its legal position is a separate matter: absent a reliance letter or another agreed arrangement, the buyer may have no contractual entitlement against the author and the author may owe it no duty of care. Where reliance is agreed, it remains subject to the report's scope, assumptions, exclusions, liability limits and permitted recipients. A vendor report can compress the timetable, but it does not displace the buyer's own verification of the matters that are material to the buyer, its own searches or its own Q&A.

Corporate and Ownership

What ASIC material shows — and what it does not

An ASIC company extract records corporate particulars and history as notified to ASIC: company status and registration details, registered and principal places of business, notified officeholders, notified share structure and any notified ultimate holding company. Because it depends on the company having lodged accurate and timely notifications, an extract can be incomplete or out of date, and it does not conclusively establish share ownership, beneficial ownership, corporate control or title to shares. Information recorded about an ultimate holding company is notified information, not proof of ultimate beneficial ownership.

It is also worth distinguishing the different searches often bundled together as “ASIC searches”:

• company extracts — current and historical, for the target and relevant related entities;
• document orders — copies of documents actually lodged with ASIC; what is available depends on what the company has lodged, and a proprietary company's constitution or its most recent annual review statement will not necessarily be an orderable public document;
• personal-name and directorship searches — other current and former appointments recorded for an individual, subject to the register's limits;
• ASIC's banned and disqualified register — persons disqualified from managing corporations or banned in relation to financial services or credit;
• published notices and insolvency enquiries — external administration and insolvency notices published by ASIC;
• AFSA's National Personal Insolvency Index — personal insolvency proceedings, which ASIC registers do not cover; and
• AFSL and credit licence register checks where the target holds an ASIC-issued licence.

The company's own records

On a share sale the primary evidence of ownership and control is the company's own documentation, not the public register. Review:

• the register of members, and share certificates where the company issues them;
• allotment, transfer and buy-back documentation, and the record of any capital reduction;
• options, convertible securities, warrants and any employee equity or phantom-equity arrangements, including vesting and change-of-control terms;
• the constitution and any replaceable-rule position, including pre-emption, transfer restrictions and director appointment mechanics;
• any shareholders agreement, including drag and tag rights, consent thresholds and deeds of accession — see Shareholders' Agreements in Australia;
• minute books and written resolutions, including the authorities for the transaction itself;
• shareholder and director loan accounts, related-party agreements and any guarantees or securities given by or for the company; and
• any trust deeds where the business or its assets are held in a trust structure, including appointor and trustee provisions.

Where the buyer proposes to fund the acquisition with support from the target or its assets, financial-assistance and related restrictions under the Corporations Act 2001 (Cth) may be engaged. The analysis is technical and depends on the structure — it should be raised early with specialist advice rather than assumed either way.

Financial and Tax

Financial due diligence

Financial due diligence is usually led by an experienced corporate accountant. It tests the financial information in the data room — audited or reviewed accounts, management accounts, the working capital position, debt and debt-like items, quality of earnings, revenue by customer and contract, gross margin, cost structure and cash conversion. Deliverables depend on the engagement and may include a quality-of-earnings report and, on larger transactions, a sources-and-uses model and a working-capital peg.

It commonly identifies normalisations — owner-related personal expenses, one-off items, related-party charges away from market, deferred capital expenditure and unsustainable working-capital releases — that change the implied multiple. Valuation methodology is a separate exercise that these findings feed.

Records typically requested

• audited or reviewed financial statements for the agreed lookback period;
• current and comparative monthly management accounts and the latest year to date;
• the current budget and prior-year budget variance analysis;
• recent BAS lodgements and the ATO integrated client account and income tax account;
• payroll registers and superannuation guarantee records;
• the asset register and depreciation schedule;
• debtors and creditors ledgers with aged balances;
• stock-on-hand reports and stocktake procedures;
• related-party loan accounts and intercompany schedules; and
• any auditor or accountant management letter identifying control or accounting-policy issues.

Tax due diligence

Tax due diligence reviews income tax, GST, FBT, PAYG withholding, payroll tax, applicable state and territory duties, superannuation guarantee and any industry-specific imposts. It looks at lodged returns, positions taken, tax consolidation status where a consolidated group is involved, transfer pricing and research and development claims where relevant. On a share sale this workstream carries real weight because the buyer takes economic and control exposure to historical positions. On an asset sale the focus narrows to GST, duty, payroll tax and superannuation for transferring employees.

Tax enforcement and revenue-office exposure

A standard search will not disclose a target's confidential tax affairs. This part of the workstream depends on what the seller provides and on targeted questions. Relevant material may include ATO account statements and correspondence, any payment arrangement and its terms, current or recent reviews and audits, objections and appeals, private rulings obtained and their scope, and state revenue-office correspondence including payroll tax and duty assessments. Director penalty exposure in respect of unpaid PAYG withholding, GST and superannuation guarantee is a matter for specialist investigation and advice rather than an assumption in either direction.

GST and the going-concern provisions

On an asset sale, GST-free treatment as the supply of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) requires that the supply be for consideration, that the recipient be registered or required to be registered for GST, that the supplier and recipient have agreed in writing that the supply is of a going concern, that the supplier supply all of the things necessary for the continued operation of the enterprise, and that the supplier carry on the enterprise until the day of the supply. Whether those requirements are met is fact-specific — the “all the things necessary” requirement in particular often turns on premises, key contracts or a licence — and tax advice is required.

Foreign resident capital gains withholding

This is a settlement and transaction tax issue, not a generic approval, and it is not engaged by every business purchase. The category of asset determines the mechanics. For direct acquisitions of taxable Australian real property under contracts entered into from 1 January 2025, the monetary threshold has been removed and the withholding rate is 15 per cent; an Australian-resident vendor ordinarily obtains a valid ATO clearance certificate and provides it by settlement, which prevents withholding, and a variation may be relevant in other cases. For indirect Australian real property interests and relevant options or rights to acquire either, the position instead turns on the purchaser-knowledge rules and on the vendor-declaration mechanisms — the clearance certificate process for direct real property is not the general solution for those categories. Rates, thresholds and forms change: check current ATO guidance and obtain transaction-specific tax advice.

Duty and other state taxes

Duty is state and territory law and the analysis differs by jurisdiction. In Victoria, business assets that include land engage land transfer duty, motor vehicles are dealt with separately, and landholder duty can apply to acquisitions of interests in entities holding Victorian land. Payroll tax, including grouping and contractor provisions, and long service leave levies in some industries are also jurisdiction-specific. Identify every jurisdiction in which the target holds land, employs people or operates, and obtain advice on each rather than assuming the Victorian position applies nationally.

Contracts, Property and Assets

Customer contracts

Identify material customers by revenue and margin and review the contracts, or the absence of contracts, for term, renewal, price escalation, termination for convenience, change-of-control consent, exclusivity, service levels, indemnities, limitation of liability and dispute resolution. Revenue concentration, weak contractual tenure and change-of-control rights bear directly on valuation, on diligence scope and on what protection the buyer will want.

Supplier and distribution contracts

Identify critical suppliers — those whose loss would materially disrupt the business — and review them on the same matrix. Confirm exclusivity, minimum-purchase and take-or-pay commitments, change-of-control rights, termination rights and pricing mechanics, and for inventory businesses the credit limits and trading terms. Distribution and agency arrangements, and franchise supply arrangements, need their own review of territory, renewal and consent requirements. Drafting-level analysis of these clauses sits in Commercial Contracts in Australia.

Leased premises

Obtain the executed lease, every variation, every exercise of option and any side letters. Verify term and options, rent and rent review mechanics, outgoings, make-good, permitted use, assignment and change-of-control provisions, security such as a bank guarantee or bond, holdover terms and registration where the lease is registrable. Confirm whether retail tenancy legislation applies — in Victoria the Retail Leases Act 2003 (Vic), with different regimes in other jurisdictions — because it affects outgoings, review mechanics and disclosure. An expiring lease with no exercised option affects continuity, value and what conditions the buyer will require.

Owned real property

For owned property, obtain title searches and plans, recent rates and land tax notices, planning certificates and permitted-use material, building and occupancy permits, essential-safety-measure and fire compliance records, environmental reports, and any lease or licence granted to or by a related entity together with evidence of its terms. Where the property is held by a related entity, the arrangements between that entity and the business — rent, term, security of tenure after completion — matter as much as the title. Duty and any applicable tax material belongs with the tax workstream. Conveyancing usually runs in parallel with a dedicated property team.

Plant and equipment

Test the asset register against physical inspection. Ownership and title are established with invoices and purchase documents, the asset register, serial and identification numbers, finance and lease documentation, inspection and other evidence — not with a PPSR search, which addresses security interests rather than ownership. Separately, PPSR searching should be scoped to the correct grantor details and to the applicable collateral class and serial-number rules, because a search run against the wrong identifier may return nothing. Where equipment is funded by chattel mortgage, finance lease or hire purchase, the transaction should deal expressly with payout figures, releases or amendments of registrations, the timing of release relative to payment, and the evidence of release the buyer requires at completion. Also review service records, warranty position, compliance with applicable Australian Standards, registration of registrable plant, operator licensing and embedded software licences. See Buying Plant and Equipment in Australia and PPSR Explained for the detail.

Franchises

If the target is a franchisee, obtain the franchise agreement, the disclosure document, the operations manual, every variation, the renewal record and any franchisor consent, and check the specific agreement and the current Franchising Code of Conduct for the applicable consent, notice and transfer requirements. If the target is a franchisor, the disclosure documents, franchisee compliance and disputes, and the Code compliance position require detailed review.

Employees and Contractors

Share sale continuity, asset sale transfer

On a share sale the company remains the employer, so the transaction itself does not change employment; the exposure is to accrued entitlements and historical non-compliance already sitting in the company. On an asset sale employment does not transfer automatically: the seller's employment relationships end and the buyer decides whom to offer employment to.

Part 2-8 of the Fair Work Act 2009 (Cth) then governs the consequences. Where there is a transfer of business, transferable instruments — including enterprise agreements and certain other instruments — can carry across and continue to cover transferring employees with the new employer. Recognition of prior service affects annual leave, redundancy entitlements and the minimum employment period for unfair dismissal, and where the new employer is not an associated entity of the old there is scope for the new employer to decide not to recognise some prior service — with the consequence that the seller may need to pay out accrued annual leave on termination. Long service leave continuity is a matter for state and territory law: in Victoria, the Long Service Leave Act 2018 (Vic), with different rules and continuity tests elsewhere.

Entitlements, compliance and exposures

• headcount and structure, individual contracts and any inconsistency between contracts and actual practice;
• the modern awards and any enterprise agreements that apply, and whether classifications and rates match the work actually performed;
• accrued annual, personal and long service leave, and the treatment of time in lieu and rostered arrangements;
• any underpayment review, remediation programme or self-disclosure, and the periods and quantum involved;
• superannuation guarantee compliance, including timing of payments and any shortfall statements;
• payroll tax, including grouping and contractor provisions in each relevant jurisdiction;
• workers' compensation registration, premium history and open claims — noting that the scheme differs by jurisdiction;
• guarantees, bonus and commission schemes, and whether they are discretionary in substance as well as in form;
• restraints of trade, confidentiality and IP assignment clauses, and their practical enforceability; and
• grievances, investigations, Fair Work Commission proceedings, discrimination complaints and any regulator correspondence.

Employee records and privacy

Personnel files contain personal and often sensitive information. Disclosure to a prospective buyer should be handled with data minimisation — anonymised schedules of role, tenure, remuneration and entitlements are usually sufficient for the analysis, with identified documents disclosed only where necessary and only to named recipients. Where the buyer will use employee information after completion, the basis for that use needs to be considered alongside the privacy analysis below.

Contractors and classification

A worker engaged as an independent contractor who is in substance an employee can create exposure for wages, leave, superannuation guarantee, payroll tax and workers' compensation, and potentially penalties for sham contracting. From 26 August 2024, for constitutionally covered businesses, section 15AA of the Fair Work Act 2009 (Cth) directs attention to the real substance, practical reality and true nature of the relationship, subject to scope, transitional rules and a high-income opt-out mechanism. Section 15AA is not the universal test: superannuation guarantee, payroll tax and workers' compensation each apply their own statutory tests and extended definitions, so a worker may be outside one regime and inside another. Classification questions warrant specific employment and tax advice.

IP, Data, Privacy and Cyber

Intellectual property

Identify the IP actually used in the business — registered trade marks, patents and designs, business names, domain names, copyright works, trade secrets and confidential information, and software licensed in. Verify ownership, licence terms and assignability against the transaction structure, confirm registration and renewal status, trace assignment chains, review licences in and out, check any IP disputes, and confirm that employee and contractor IP assignment clauses were actually signed.

For trade marks, search the IP Australia registers by owner and by mark; confirm currency and renewals, that the registered classes cover the goods and services actually supplied, and that the registered owner is the entity being sold; and review any pending opposition, removal or amendment action. A logo registered in a director's personal name or an agency's name is a common SME finding and usually needs an assignment, a licence or another transaction-specific solution.

Copyright is unregistered in Australia under the Copyright Act 1968 (Cth). Under section 35(2) the author is generally the first owner, subject to exceptions; section 35(6) generally applies to works made in pursuance of the terms of employment under a contract of service, subject to agreement and statutory exceptions. Copyright in material created by a contractor does not generally vest in the client merely because the client commissioned and paid for the work, although statutory exceptions apply — including certain commissioned photographs, portraits and engravings under section 35(5). The safe course is a written assignment signed by or on behalf of the assignor, as section 196(3) requires. Software, websites, marketing collateral, manuals and bespoke training material are the usual chain-of-title problems.

For domains, run a registration lookup on each domain used in the business, confirm the registrant is the entity being sold or one that will transfer it, confirm renewal and auto-renewal, check the eligibility, transfer and change-of-control rules for each namespace, and confirm that DNS, email and hosting accounts can actually be moved at completion. For software, identify the licensor, the terms (including click-through terms), the licence type and metric, expiry and renewal, transferability on change of control or asset sale, audit rights, support arrangements and any usage-based pricing, and maintain an open-source register with the applicable licence conditions.

Privacy and personal information

Confirm whether the target is subject to the Privacy Act 1988 (Cth). Small-business coverage turns on turnover against the applicable threshold and on statutory exceptions — coverage can arise, among other things, for health service providers, businesses trading in personal information and contracted service providers under Commonwealth contracts — so the position should be verified for the specific target rather than assumed from size. Where the Act applies, review the privacy policy, collection notices, consent records and marketing permissions, cross-border disclosure practices, retention and destruction practice, and compliance with the Spam Act 2003 (Cth) and the Do Not Call Register Act 2006 (Cth).

Two transaction-specific questions arise. First, transfer and use: whether the customer and employee databases can lawfully be disclosed to the buyer and used by the buyer for its purposes, which engages the use and disclosure limits in Australian Privacy Principle 6 and the terms on which the information was collected. Second, exposure: information-security obligations, the incident and notification history under the Notifiable Data Breaches scheme, and any regulator correspondence or determination. There is no publicly searchable register of individual breach notifications, so this depends on the target's own records and answers.

Cyber, systems and AI

Scale this to the target. Areas worth investigating on a risk basis include the security policy and incident response plan, the most recent penetration test or assessment and whether findings were remediated, patching currency, multi-factor authentication coverage, privileged access management, backup regimes and whether restoration has actually been tested, cyber insurance cover and exclusions, and the history of material incidents including any ransomware event and any reporting obligations engaged by it. Where the target operates assets in a regulated sector, obligations under the critical infrastructure regime may apply and need to be identified.

Third-party dependency is often the real risk. Review processor and cloud arrangements for data location, sub-processing, security commitments, audit rights, change of control, and exit and portability terms — a business that cannot extract its own data on exit has a transaction-relevant problem. Where the business relies on material AI systems, identify the provider terms, the rights in inputs, outputs and training data, whether customer or personal information is being used in ways the collection notices do not support, and how dependent the business is on a single third-party model.

Regulatory, WHS and Environmental

Licences and change of control

Identify the licences, registrations, permits and accreditations required to operate — liquor and gaming, food premises, professional and trade licensing, financial services and credit licences, and sector regulators such as the TGA, ACMA, AHPRA and ASQA. For each, verify currency and conditions, identify the licensee entity, and establish whether a change of control or an asset sale requires notification, an application or a new licence. Licences are not uniformly transferable — an AFSL, for example, is not simply assigned — and a licence that cannot practically move can drive the choice between a share sale and an asset sale.

Work health and safety

The legislative framework is not uniform. Victoria operates under the Occupational Health and Safety Act 2004 (Vic) and the Victorian OHS Regulations, regulated by WorkSafe Victoria; most other jurisdictions operate model work health and safety legislation, which differs in duty structure, consultation requirements, incident notification and offence provisions. Identify which regime applies in each place the business operates and take local advice rather than applying one jurisdiction's rules nationally.

Substantively, review the safety management system, hazard and incident registers, risk assessments and safe work procedures, training and licensing records for high-risk work, plant registration where required, regulator notices, prosecutions and enforceable undertakings, and the workers' compensation claims and premium history — a premium pattern is a prompt for inquiry rather than proof of an underlying problem. Higher-risk industries such as construction, manufacturing, transport and agriculture usually warrant specialist safety diligence.

Environmental

Where the business occupies or has occupied industrial land, handles hazardous substances, generates waste or holds an environmental authorisation, an environmental site assessment — a desktop review, and where indicated an intrusive investigation — by an experienced consultant is the usual step. Review licences, permits and notices, dangerous goods and chemical storage, asbestos registers and management plans, waste and discharge arrangements, contaminated-land records, and the duties imposed by the applicable regime — in Victoria, the general environmental duty and the notification and management duties under the Environment Protection Act 2017 (Vic), with different regimes and regulators elsewhere. Contamination of unknown extent is one of the issues least amenable to contractual solution.

Insurance

Obtain the schedule of policies — public and product liability, industrial special risks, motor, marine, professional indemnity, directors and officers, management liability, cyber, business interruption and workers' compensation. Confirm currency and premium status, claims history, sub-limits and exclusions, retroactive cover for claims-made policies, whether cover responds after a change of control, and run-off arrangements for outgoing directors.

Competition law

Three distinct questions arise. First, the buyer's own acquisition: from 1 January 2026 an acquisition that meets the prescribed notification thresholds must be notified to the ACCC under the mandatory suspensory regime and must not be completed before it is permitted. Threshold assessment can require aggregation of connected or serial acquisitions and turnover or transaction-value tests set by the responsible Minister, and the current thresholds and exemptions should be checked against ACCC material for each transaction rather than assumed. Whether the acquisition raises a substantive concern — whether it would have the effect, or be likely to have the effect, of substantially lessening competition — is a separate assessment from the notification question.

Second, the target's own conduct may create contingent liabilities. Cartel conduct is subject to specific prohibitions, including criminal provisions, and stands apart from other restrictive trade practices. Other conduct — exclusive dealing, including what was formerly treated as per se third-line forcing, and misuse of market power — is assessed by reference to whether it has the purpose or effect of substantially lessening competition; third-line forcing has not been a per se contravention since the 2017 reforms, so a categorical statement to the contrary is wrong.

Third, conduct during the transaction itself. Parties that compete must not use the transaction as a vehicle to coordinate on price, customers, tenders or output, and information exchange before completion needs to be managed proportionately. Depending on the sensitivity of the information and the parties' overlap, controls may include aggregation, redaction, delayed or staged disclosure, review by external advisers only, and — where warranted — a clean team governed by a written protocol. The object in each case is that competitively sensitive information does not reach people making current operational decisions, and that the parties do not coordinate their conduct before completion. Gun-jumping — behaving as though the acquisition has completed before it is permitted — carries its own risk under the notification regime. Where competitors, vertical supply chains or significant industry participants are involved, take specialist competition advice early.

Other risk-based regulatory prompts

• Consumer law and product risk — consumer guarantee and misleading conduct claims, complaint volumes, recall history and mandatory reporting, product liability exposure and the terms of any supplier indemnity;
• Sanctions and export controls — customer, supplier and beneficial-owner screening where the business trades internationally, and any permit requirements for controlled goods or technology;
• Bribery and corruption — third-party agents and intermediaries, facilitation payments, gifts and hospitality practice, and the adequacy of controls where the business operates in higher-risk markets;
• Modern slavery — whether the target or the buyer's group meets the reporting threshold, and the state of supply-chain mapping and supplier due diligence;
• AML/CTF — whether the business provides designated services, its enrolment and registration position, and its programme, customer due diligence and reporting obligations, taking account of the reforms commencing in 2026 that extend obligations to further sectors. AUSTRAC does not grant a generic approval for an acquisition; the question is whether the entity has, and after completion continues to have, the required enrolment, registration and compliance; and
• Foreign investment — screening under the Foreign Acquisitions and Takeovers Act 1975 (Cth) is investor, asset, value and sector specific and is actively administered, so it belongs in the structuring discussion rather than late in the timetable.

Searches, Disputes and Security Interests

Scoping searches, and their limits

Searches are evidence-gathering tools, not a compliance ritual. Which searches are appropriate depends on the structure, the assets, the jurisdictions involved, the risks already identified and materiality. Each has limits that should be understood before conclusions are drawn from a nil result:

• the PPSR records security interests in personal property, not ownership, and results depend on searching the correct grantor identifier and collateral class;
• ASIC extracts and document orders show what has been notified and lodged, and may be incomplete or delayed;
• court, tribunal and regulator searches cover only the registers actually searched, may not capture matters filed under different names or in other jurisdictions, and cannot establish that no claim, complaint, investigation or threatened proceeding exists;
• title searches address registered interests and may not disclose unregistered rights or occupation arrangements; and
• insolvency indices address recorded proceedings only.

Deciding not to run a search does not automatically extinguish contractual, statutory, equitable or general-law remedies. It may, however, materially weaken the buyer's practical position — on knowledge, on disclosure arguments and on proving loss — so an omission should be a considered scoping decision with the buyer's agreement, not an oversight.

Disputes and proceedings

A dispute-focused review typically covers the relevant federal and state courts and tribunals, the Fair Work Commission, industry regulators, and personal insolvency records where individual sellers or principals are involved. It should be paired with the target's own records: letters of demand, solicitors' correspondence, mediation and arbitration records, litigation provisions in the accounts and management answers about threatened claims. A proceeding is not automatically a red flag; what matters is its subject, stage, quantum, insurance position and the effect on the business. See Resolving Business Disputes Before Court and Letters of Demand.

Security interests in practice

Under the Personal Property Securities Act 2009 (Cth), registered security interests continue against the company on a share sale; on an asset sale the transaction must deal with interests affecting the assets being transferred. The practical work is matching each registration to the underlying finance or supply document, obtaining payout figures, and agreeing the mechanism and timing — release, amendment to release specific collateral, or a payout at completion with agreed evidence of release delivered to the buyer. Retention-of-title arrangements with suppliers, and interests in leased or bailed goods on site, are easy to miss and can produce unexpected third-party claims to assets the buyer thought it was acquiring. Section 267 vesting rules operate on the grantor's insolvency in respect of unperfected interests; a defective registration does not by itself transfer title to the company. The technical detail is in PPSR Explained.

Turning Findings into Transaction Terms

Disclosure — what the seller actually owes

A private seller does not owe a free-standing, universal obligation to compile and hand over a particular due diligence package merely because a transaction is proposed. What is provided is a matter of negotiation, process and exclusivity. Distinct legal consequences nevertheless attach to the information that does change hands:

• contractual disclosure — warranties are qualified by a negotiated disclosure letter or schedule, and the effect of disclosure depends on the definitions used;
• representations and answers — statements made during diligence and in the Q&A may found claims independently of the warranty package, depending on the drafting and the entire-agreement provisions;
• Australian Consumer Law — misleading or deceptive conduct in trade or commerce carries its own exposure, and contractual limitations do not necessarily answer it; and
• negotiated definitions — what “fairly disclosed” means, whether general data-room disclosure qualifies the warranties, whether the buyer's knowledge or its diligence findings limit claims, and how specific disclosures are matched to numbered warranties.

The detailed mechanics — caps, baskets, de minimis, survival periods, knowledge qualifiers, indemnity drafting and warranty and indemnity insurance — are dealt with in Representations, Warranties and Indemnities.

Conditions, MAC provisions and price

Findings translate into transaction terms in a limited number of ways: a price adjustment or a change to the working-capital mechanism; a warranty; a specific indemnity; a condition precedent; a pre-completion remediation obligation; a retention or escrow; a post-completion covenant; or a decision not to proceed. Conditions precedent should be tied to identified steps — a required regulatory notification or approval, a landlord consent, a specified customer consent, a financier consent, agreed releases of security interests, a new lease, a particular remediation — rather than to a vague category.

A material adverse change provision is not necessarily “a condition”. Depending on the drafting, an adverse-change concept may operate as a condition precedent, as a stand-alone termination right, as a condition of the buyer's obligation to complete, or as part of a warranty bring-down at completion — and each produces different rights, notice requirements and remedies. What counts as material, what carve-outs apply for market or industry-wide events, and who bears the risk of known issues are all negotiated.

Illustrative findings and possible responses

These are examples only; the appropriate response depends on the facts, the structure and the negotiation.

When a buyer may reconsider

Not every issue can be solved by drafting. Matters that commonly cause a buyer to reconsider include material undisclosed tax exposure that cannot be quantified or covered; contamination of unknown extent; criminal or serious regulatory proceedings against the principals; a concentration risk the customer will not address; a licence that cannot practically move on the chosen structure; a pattern of conduct suggesting pervasive non-compliance; and refusal to give reasonable warranties, disclosure or indemnities.

Completion and Integration

From findings to the completion checklist

Diligence findings should drive the completion checklist rather than sit beside it. Every consent, release, assignment, rectification and remediation identified in diligence needs an owner, a deadline and evidence requirements. On a share sale the checklist typically includes share transfers and certificates, ASIC notifications, director and secretary changes, minute books and registers, bank mandates, resignations and releases of guarantees, and any warranty bring-down. On an asset sale it typically includes asset transfer documents, IP assignments, lease assignment or new lease, contract assignments and novations, releases or amendments of registered security interests, accepted offers of employment, and physical delivery or possession. The mechanics are covered in Business Sale Agreements in Victoria.

Day 1 and the first weeks

• licences, registrations and permits in the buyer's name or properly notified;
• bank accounts, mandates, payment facilities and merchant arrangements;
• insurance bound from completion, with run-off cover arranged where agreed;
• employment onboarding, payroll set-up, superannuation choice and workers' compensation registration;
• privacy notices, consents and marketing permissions reviewed for the buyer's use of customer and employee data;
• systems, domain, email and administrator access transferred, and former administrators removed;
• contract novations and customer and supplier communications;
• PPSR actions — confirming discharges and registering the buyer's own interests where relevant;
• books, records and statutory registers delivered and stored; and
• any transitional services arrangement with the seller, with a defined scope and end date.

Findings that were accepted rather than remediated before completion — an unregistered brand, a lapsed policy, an undocumented arrangement — should be carried into a written integration plan with owners and dates, not left in the report.

Checklist

A working request list, to be cut down or extended according to the agreed scope:

Working sequence

A private-treaty acquisition commonly moves through the phases below. Timing depends on transaction size, data-room quality and any regulatory steps, so no fixed timetable is given.

• Preliminaries. Confidentiality agreement, heads of agreement, exclusivity, agreed diligence scope and materiality, adviser engagements, lender approach.
• First phase. Data-room access, red-flag review of agreed high-risk areas, first Q&A round, baseline searches.
• Deep dive. Site visits, management sessions, specialist workstreams — environmental, safety, technology, technical.
• Second phase. Follow-up Q&A, draft reports, quality-of-earnings and working-capital analysis, consolidated issues list.
• Documentation. Sale agreement, warranty package, disclosure letter or schedule, conditions and completion checklist built from the findings.
• Signing to completion. Satisfaction of conditions including any required regulatory step, bring-down of warranties, completion, then integration against the plan.

Who does what

Roles depend on each engagement. Lawyers typically handle legal diligence, the sale agreement, the disclosure process, security-interest and other searches, consents and the completion checklist. Accountants handle financial and tax diligence and tax structuring. Valuers, or accountants on smaller transactions, provide valuation input. Specialists are added as the target requires — environmental, safety, technology, technical and human resources. The buyer, or a nominated lead adviser, coordinates the workstreams so findings reach one issues list and one decision-maker.

Parke Lawyers acts for Australian buyers and sellers of small and medium businesses on structuring, due diligence, sale agreement negotiation, conditions and completion, and post-completion integration, and on the related succession and estate-planning work for selling principals. See our Commercial & Business Law service page.

Frequently Asked Questions

Authoritative Sources

• Corporations Act 2001 (Cth) — current compilation; corporate records, officeholder duties, execution and financial assistance provisions.
• Competition and Consumer Act 2010 (Cth) — current compilation, including the merger provisions and the Australian Consumer Law in Schedule 2.
• ACCC — Mergers and acquisitions and Thresholds for notifying acquisitions — the mandatory notification regime operating from 1 January 2026, and the current thresholds and exemptions.
• Fair Work Act 2009 (Cth) — current compilation, including Part 2-8 transfer of business and section 15AA.
• Personal Property Securities Act 2009 (Cth) and Personal Property Securities Register — the statutory framework and the official register guidance, which states that the PPSR is not a register of property ownership.
• A New Tax System (Goods and Services Tax) Act 1999 (Cth) and ATO — Sale of a going concern — section 38-325 and the ATO's guidance on GST-free going-concern supplies.
• ATO — Foreign resident capital gains withholding — current guidance on when withholding applies and on clearance certificates for Australian residents.
• Foreign Acquisitions and Takeovers Act 1975 (Cth) — current compilation of the foreign investment screening framework.
• Privacy Act 1988 (Cth) and OAIC — Notifiable Data Breaches — the Australian Privacy Principles and the notification scheme.
• Copyright Act 1968 (Cth) and IP Australia — copyright ownership and assignment, and the registered trade mark, patent and design registers.
• ASIC — Search ASIC's registers and banned and disqualified register — what company and personal searches cover.
• AFSA — National Personal Insolvency Index — the record of personal insolvency proceedings, which ASIC registers do not cover.
• AUSTRAC — About the AML/CTF reforms — the reform programme and the extension of obligations to further sectors.
• Occupational Health and Safety Act 2004 (Vic) and WorkSafe Victoria — the Victorian safety regime, which differs from the model work health and safety legislation applying in most other jurisdictions.
• EPA Victoria and State Revenue Office Victoria — Victorian environmental duties and authorisations, and Victorian duty, land tax and payroll tax.
• Competition and Consumer (Industry Codes—Franchising) Regulations 2024 and ACCC — Franchising Code of Conduct — the current Code, including disclosure, consent and transfer requirements.
• Security of Critical Infrastructure Act 2018 (Cth) and Cyber and Infrastructure Security Centre — the critical infrastructure obligations and the regulator's current guidance on which assets and sectors are covered.
• Long Service Leave Act 2018 (Vic) and Wage Inspectorate Victoria — long service leave — Victorian long service leave entitlements and continuity of service on a transfer of business.