Selling a Business in Victoria: A Complete Legal Guide

Vendor Preparation: A Twelve-Month Runway

Vendor preparation typically begins twelve to twenty-four months before the business is marketed. In that window the vendor may address issues that would otherwise be raised by the buyer in due diligence and reflected in price, warranties or retention. A typical preparation checklist covers:

• Financial normalisation — remove owner-benefit expenses, non-recurring items and related-party charges from the profit-and-loss statement to present sustainable EBITDA.
• Corporate structure — confirm the company holding the business is the actual owner of every asset, and clean up any assets held personally or through related trusts.
• Leases — confirm the current lease is in writing, in the correct entity's name and either has adequate remaining term or an exercisable option.
• Employees — confirm modern-award coverage, employee classification, accrued entitlements (annual leave, personal / carer's leave, long service leave), and remedy any historical underpayment.
• Contracts — identify customer and supplier contracts with change-of-control or assignment restrictions and plan the consent path.
• Intellectual property — confirm the company owns (or has an enforceable licence to) every trade mark, software system, domain, brand asset and proprietary process.
• Licences and permits — confirm which licences transfer with the business, which require a fresh application, and which cannot be transferred.
• PPSR — clean up historical registrations, particularly stale purchase money security interests over equipment long since discharged.

Confidentiality Before Anything Else

The first document in a business sale is ordinarily the confidentiality agreement, or NDA. It should be signed by each prospective buyer before any financial or operational information is released, and should cover: the existence of the negotiations; the information disclosed; an obligation not to use the information other than to evaluate the acquisition; non-solicitation of employees, customers and suppliers for a defined period; return or destruction of information at the end of negotiations; and Australian governing law and jurisdiction. The confidentiality obligations survive the end of the negotiation regardless of whether a deal completes.

Heads of Agreement

Once a serious buyer is identified, a Heads of Agreement (also called a term sheet, letter of intent or memorandum of understanding) records the key commercial terms in principle — price, structure (share or asset), payment terms, conditions to signing, an exclusivity period, and the timetable to a binding contract. Most of the document is non-binding indicative wording; the confidentiality, exclusivity, costs and governing law clauses are expressed to be binding. See our companion article on Heads of Agreement vs Letter of Intent for the drafting detail.

Buyer Due Diligence

Buyer due diligence typically covers legal, financial and commercial verification of what is being sold. See our business due diligence guide for the buyer's checklist. From the vendor side the priorities are staging (not all information at once), confidentiality (a virtual data room with access logs beats emailing spreadsheets), and completeness — every issue disclosed in due diligence is an issue that cannot later be sued on under a warranty.

Share Sale vs Asset Sale

In an asset sale only identified assets and specified assumed liabilities transfer, with each contract, retail lease and licence assigned or novated on its own terms and subject to counterparty consent and any statutory, employee, tax, environmental or successor consequences. In a share sale the company remains the owner of its assets, contracts, employees and liabilities; the buyer acquires the shares — and control and economic exposure — rather than personally inheriting each liability of the company. Neither structure is universally preferable. The decision turns on the transaction facts, including the transferability of key contracts and licences, tax outcomes (for example, any Division 152 small-business CGT concessions available on shares), warranty and indemnity risk allocation and each side's commercial preference. See our companion article on share sale vs asset sale for the trade-offs in detail.

Contract Structure

The business sale agreement (asset sale) or share sale agreement (share sale) is the central document. Vendor priorities in negotiation typically include:

• Purchase price certainty — a fixed price with limited adjustments, or a completion-accounts mechanism with narrow adjustment items and a cap.
• Deposit release — release of the deposit on signing where possible, or at least on satisfaction of conditions precedent.
• Conditions precedent — kept to items the vendor can influence (landlord consent, key contract consents, ATO ruling) rather than open-ended finance conditions.
• Warranty caps and time limits — cap on aggregate warranty liability, minimum threshold per claim (a de minimis) and a total-claim basket.
• Disclosure — a comprehensive disclosure letter that qualifies the warranties by everything disclosed in the data room and in specific written disclosures.
• Restraint of trade — proportionate to the goodwill being sold, with cascading duration and geographic clauses.
• Vendor assistance / transition — a defined period, at a defined cost, with defined hours of work — not an open-ended obligation to help.

Retail Lease Assignment

For retail premises the Retail Leases Act 2003 (Vic) imposes process and disclosure obligations on the outgoing tenant and the landlord. Section 60 governs landlord's consent to assignment — the landlord must not unreasonably withhold consent but may require the assignee to meet reasonable financial and experience criteria, pay the landlord's reasonable costs, provide a bank guarantee, provide personal guarantees and enter a deed of consent and assignment. Whether the outgoing tenant is released for defaults after assignment depends on the terms of the deed and the landlord's position; historical obligations ordinarily survive assignment. Lease consent processes can affect settlement timing, so the landlord conversation is usually best started early. For the broader framework see our article on when the Retail Leases Act applies in Victoria.

Employees on an Asset Sale

On an asset sale the vendor's employment of each employee ordinarily ends at completion and the buyer typically offers new employment. Part 2-8 of the Fair Work Act 2009 (Cth) transfer-of-business rules affect the recognition of prior service for certain National Employment Standards entitlements. The outcome for annual leave, personal / carer's leave, redundancy, notice and unfair dismissal service depends on whether the buyer is an associated entity of the vendor, on the terms of any offer of employment and on whether the buyer has notified the employee in writing before the transfer as the Act permits. Long service leave in Victoria is governed by the Long Service Leave Act 2018 (Vic) and specific transfer rules apply. Accrued annual leave is often paid out at completion by the vendor with a corresponding price adjustment, but that is a matter for negotiation rather than an automatic rule. The employee paperwork — termination letters from the vendor, offer letters and new contracts from the buyer, transfer notices — is usually prepared as a suite alongside the business sale agreement.

GST and the Going-Concern Exemption

Section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) may make the supply of a going concern GST-free where each of the statutory elements is satisfied: the supplier supplies everything necessary for the continued operation of the enterprise; the supplier carries on the enterprise until the day of the supply; the recipient is registered or required to be registered for GST; the supply is for consideration; and the parties have agreed in writing on or before the day of the supply that the supply is of a going concern. Availability turns on the facts and the documentation. If the exemption does not apply, GST may be payable on the supply and the buyer's entitlement to an input tax credit depends on separate rules and timing.

Foreign Resident Capital Gains Withholding

Where a business sale includes the disposal of Australian real property or a relevant interest, the Foreign Resident Capital Gains Withholding (FRCGW) rules under the Taxation Administration Act 1953 (Cth) may require the purchaser to withhold a percentage of the purchase price and remit it to the Australian Taxation Office at settlement, unless a valid clearance certificate, variation notice or an applicable excluded transaction removes or reduces the obligation. From 1 January 2025 the withholding rate is 15% and the regime applies to all Australian real-property sales regardless of value. The rules are relevant only where the business transaction includes Australian real property or a relevant interest — not to every business sale. Coordinated tax advice is prudent where any real-property interest forms part of the transaction.

ACCC merger notification

From 1 January 2026, acquisitions that meet prescribed notification thresholds or fall within a prescribed class must be notified to the Australian Competition and Consumer Commission under Australia's mandatory merger-control regime. A notifiable acquisition must not complete unless and until the ACCC has approved it or a notification waiver applies. The thresholds are based on matters including Australian revenue and/or global transaction value, with aggregation and exemptions capable of affecting the analysis. Whether a business sale meets a notification threshold or falls within an exemption depends on the transaction and the current Competition and Consumer (Notification of Acquisitions) Determination and ACCC guidance. Notification thresholds and the substantive competition assessment are separate questions.

Warranties, Indemnities and Retention

Warranties are contractual promises about the state of the business at completion — for example, that the accounts are true and fair, that all tax has been paid, that no undisclosed litigation is pending, that the assets are owned and unencumbered, and that employees have been paid their entitlements. See our companion article on representations, warranties and indemnities. Liability caps, minimum claim thresholds (de minimis), baskets, disclosure carve-outs, survival periods, adjustments, conditions precedent and material adverse change clauses are all negotiated and transaction-specific. A retention amount held for a defined period is a common alternative to a bank guarantee, but figures and durations are matters for negotiation rather than fixed market positions.

PPSR Releases

The Personal Property Securities Register records security interests over personal property. Before completion the vendor obtains discharge authorities from every registered secured party and arranges for registrations to be released at settlement. A perfectly good business sale can be spoiled by a stale ROT registration by a former supplier that the vendor never got around to discharging. See our PPSR explained guide for the framework.

Personal Guarantees on Exit

Vendors who signed personal guarantees to the landlord, the bank, key suppliers and equipment financiers do not get released simply by selling the business — the beneficiary must actively release the guarantor. Every business sale plan should identify each outstanding guarantee and negotiate its release as a condition to, or a covenant at, completion. See our companion article on personal guarantees in Australian commercial transactions for the mechanics.

Settlement Day

Settlement is a coordinated event: signed transfer documents exchanged, purchase price paid, PPSR releases confirmed, key handover completed, notices sent to customers and suppliers, employee termination and re-employment paperwork exchanged, and the vendor's company retained for a defined period to run out residual liabilities. A settlement checklist prepared two weeks before completion prevents the small oversights that cause disputes in the first month after settlement.

Post-Completion

After settlement the vendor typically has: a transition period providing agreed support to the buyer; ongoing confidentiality and restraint obligations; a residual company to close down (or repurpose); tax obligations arising from the sale, including CGT (with any Division 152 small business concessions), GST reconciliation and payroll close-out; and potentially deferred consideration, earn-outs or vendor finance to manage. Vendor obligations under the sale agreement do not end at completion — they run for the life of the warranty period and, in the case of tax, capital and title, for years afterwards.

Cross-Referenced Reading

For agreement-specific drafting detail, see our companion article on business sale agreements in Victoria. For business valuation, see our business valuation guide. For the founder's death or incapacity mid-transaction, see our business owner death in Victoria article.

Frequently Asked Questions