The decision that determines everything else
Are you buying the assets, or the shares in the company that owns them? Everything — liability, tax, employees, contracts, duty — follows from that.
| Asset sale | Share sale | |
|---|---|---|
| Historic liabilities | Generally stay with the seller | Stay with the company — you buy them |
| Unknown liabilities | Limited exposure | Full exposure unless warranties cover it |
| Employees | Terminated and re-employed; entitlements negotiated | Continue unbroken with accrued entitlements |
| Contracts and leases | Need assignment or novation | Continue, subject to change-of-control clauses |
| Licences and permits | Often must be reapplied for | Usually stay with the company |
| Transfer duty | Payable on dutiable assets | Generally not, unless landholder provisions apply |
| Seller's CGT position | Often worse | Often better, with concessions available |
Due diligence
Due diligence is not a formality and it is not the accountant's job alone. It is how you find out what you are actually buying, and it should happen before the contract becomes unconditional — not after.
- Financial statements and tax returns, three years
- The lease, and whether it can be assigned
- Employee list, entitlements and accrued leave
- Supplier and customer contracts
- Licences, permits and registrations
- PPSR searches over the assets
- Intellectual property and business names
- Current or threatened disputes
- Insurance history and claims
- Environmental and workplace safety compliance
Search the PPSR before settlement
The Personal Property Securities Register records security interests over business assets. Plant and equipment that appears to be owned outright may be subject to a registered interest, and a buyer who does not search can acquire assets a financier is entitled to repossess.
It is a cheap search and an expensive omission. The contract should also require the seller to obtain releases of any registered interests before completion.
Price, deposit and payment
The headline price is rarely the whole arrangement. Watch for stock at valuation on completion, adjustments for prepaid expenses and accrued entitlements, earn-outs tied to future performance, and vendor finance.
Earn-outs cause more disputes than any other pricing mechanism, because they require the parties to agree years later on figures neither controls entirely. If you are using one, the calculation method, the information rights and the dispute mechanism need to be drafted with real care.
GST also matters more than people expect. Where the sale qualifies as a supply of a going concern it may be GST-free, but the conditions are specific and must be satisfied — both parties registered, the supply of everything necessary for continued operation, the business carried on until completion, and written agreement that it is a going concern supply. Getting it wrong moves the price by a tenth.
Employees
In an asset sale the employees are not automatically transferred. The seller terminates and the buyer offers new employment, and who pays accrued leave and redundancy is a matter for negotiation reflected in the price.
Where the buyer recognises prior service, accrued entitlements carry over and the price should be adjusted accordingly. Where it does not, the seller must pay them out. Either is workable; leaving it unaddressed is not, and it is a common source of post-completion argument.
In a share sale nothing changes: the employer is the company, and employment continues unbroken with all accrued entitlements intact. That is a liability you are buying, and it should be quantified in due diligence.
The lease is often the real asset
For a retail or hospitality business, the lease may be worth more than the plant. A buyer needs certainty of tenure, and that means checking the remaining term, the options, whether the landlord will consent to assignment, and on what conditions.
Where the Retail Shop Leases Act 1994 (Qld) applies, an assignor has its own disclosure obligations to a prospective assignee, generally at least 7 days before the landlord is asked to consent. Landlord consent is frequently the item that delays completion, so start it early rather than treating it as a formality.
Restraint of trade
A buyer paying for goodwill needs the seller not to set up in competition next month. A restraint of trade in a business sale is more readily enforced than in an employment contract, because the buyer has paid for what it protects.
It still must be reasonable. A restraint unlimited in time, area or activity risks being void entirely, leaving the buyer with no protection at all. Cascading clauses are standard practice, but they are not a substitute for drafting something defensible in the first place.
What it costs
- Written estimate before we start
- Fixed fee for straightforward transactions
- Due diligence scoped and quoted separately
- Searches and registration at cost
- We coordinate with your accountant
- Honest views on deal risk
Frequently asked questions
Buying shares means acquiring the company with its entire history, including tax position, employee entitlements and any litigation. Buying assets generally leaves those liabilities behind, but the tax outcome for the seller is usually worse, which is why sellers prefer share sales. Asset sales can also attract transfer duty and require contracts, leases and licences to be assigned or reapplied for.
In an asset sale employees are not automatically transferred: the seller terminates and the buyer offers new employment, and who pays accrued leave and redundancy is negotiated and reflected in the price. In a share sale the employer is unchanged, so employment continues unbroken with all accrued entitlements intact.
Possibly not. Where the sale qualifies as a supply of a going concern it may be GST-free, but the conditions are specific: both parties registered for GST, the supply of everything necessary for continued operation, the business carried on until completion, and written agreement that it is a going concern supply. Getting this wrong changes the price materially.
The Personal Property Securities Register records security interests over business assets. Equipment that appears to be owned outright may be subject to a registered interest held by a financier entitled to recover it. Search before settlement, and require the seller to obtain releases of any registered interests before completion.
More readily than one in an employment contract, because the buyer has paid for the goodwill the restraint protects. It must still be reasonable in duration, geographic area and scope of activity. A restraint that goes too far risks being void entirely, leaving the buyer unprotected.
An earn-out ties part of the price to the business's future performance. It can bridge a valuation gap, but it causes more disputes than any other pricing mechanism because the parties must later agree on figures neither fully controls. If you use one, the calculation method, information rights and dispute mechanism need careful drafting.
More information
Thinking of buying a business? Ensure you do the necessary due-diligence to avoid potential disasters. Get our expert legal advice.
Business acquisition lawyers Rockhampton
Whether you’ve done it before or you’re doing so for the first time, buying an established, independent business poses a unique set of challenges.
Whilst the acquisition of an existing, successful business may prove to be a no-brainer, often things aren’t always what they seem, or may change rapidly with the onset of a new business owner.
Trying to address the array of issues that often arise in the acquisition of a business is not only time-consuming but fraught with significant consequences if things are missed.
To avoid the pitfalls, consult with one of our Rockhampton Business Lawyers for assistance with:
- Purchasing strategy – assets only or shares (if applicable)
- Assessing associated tax implications
- All legal aspects of due diligence
- Licensing
- Leasing (including retail shop leasing)
- Buying a business as a “going concern”
- The actual purchase contract/agreement
- Structuring
- Transfers
- Transfer duty
We can also assist with:
- Business Structuring
- Business Succession, Shareholder & Management Agreements
- Franchising
- Commercial Leasing
- Commercial Property Conveyancing
- Agribusiness
- Hiring and Chattel Leases
- Partnerships, Companies & Trusts
- Banking and Finance
- Planning and Environment
- Mining Resource and Resumption
- Taxation
- Insolvency
- Personal Property Security Register
- Mediation
Extensive Experience
Our professional team has extensive experience in a wide range of legal areas. Our approach is one of planning and involvement. We will continue to be there to support you with accurate and timely advice.
This page is general information about the law as it applies in Queensland, current as at 2026. It is not legal advice and does not take your circumstances into account. Figures set by regulation are indexed and change. Speak to one of our lawyers before acting.