Have you considered buying an Australian business? There are many different steps involved in buying a business, each of which requires careful consideration to ensure that the transfer is finalized. In this article, we will describe the key steps in purchasing Australian business and the related legal issues involved.
Pre-contract negotiations
After you find an interesting business, you first need to make a simple assessment of the value of the business, including the profit margin of the business, the price of the fixed assets of the business, the length of the business lease, and so on. At this stage, you can also ask the seller to provide financial documents to reflect the value of the business, such as the business's financial statements, tax returns, and so on. If you need to seek professional advice to assess the value of your business, you can also do so at this stage.
After you have completed your pre-evaluation of the business and determined that the business is worth buying, you can begin to negotiate with the seller some key terms of the contract, such as the price of the business, delivery time, whether there is a trial run period, and so on. At this stage, the seller may ask you to pay a small down payment, so that during the negotiation period, the seller promises not to continue to contact other potential buyers. Such a request is not unreasonable, but at the same time you also need to ask the seller, since you have not signed any contract, before signing a formal contract, any deposit you pay is refundable. At the same time, we also recommend that you implement such terms in writing and sign the deposit by both parties when the deposit is paid by you.
Sign a contract
After you and the seller have concluded some of the key terms of the business, the seller or his lawyer should draw up a formal business transfer agreement in accordance with the agreement reached between you. Business transfer contracts usually contain some standard clauses, which apply to almost all business transactions and are relatively fair to buyers and sellers. On the basis of the standard terms, the general seller will set some special terms for different businesses. These special clauses often have a great impact on your interests, so we suggest that you should pay special attention to some of these special clauses when reading the contract.
At this stage, if there is any problem with the terms of the contract, you should further negotiate with the seller to confirm the final terms of the contract. Once the final terms are determined, you and the seller may enter into a formal contract. At this point, the seller will usually ask you to pay 10% of the amount purchased by the business as a formal deposit. After you have signed the contract and paid the deposit, your sale and purchase agreement will take effect. In this regard, you and the seller have a formal contract protected by the law, after the signing of the contract, if there is a breach of contract, you will have to bear the corresponding liability for breach of contract. As far as you are a buyer, the most immediate liability for breach of contract is to join in your inability to perform the contract to complete the transfer of the business, then the seller will have the right to terminate the contract, forfeit 10% of the deposit you have paid, and pursue your corresponding breach of contract liability.
Preparation before closing
In a contract for sale and purchase, the two parties usually agree on a date for the delivery of the business, which we call the trading day (Settlement Date). On deal day, as a buyer, some preparatory work is needed to ensure that the business can be delivered as scheduled. The main preparations include:
- If necessary, prepare the appropriate loans;
- Obtain the landlord's consent to transfer the seller's existing lease or sign a new lease with the landlord;
- If the business also has other permits or licences, arrange the transfer of the relevant licence.
One of the key points in these preparations is to obtain permission from the landlord to accept existing leases or sign new leases. Because without the landlord's permission, you do not have the right to use the appropriate site to conduct business. In other words, business cannot complete delivery. Generally speaking, as long as you have sufficient funds and some relevant business experience, the landlord has no right to reject your request to take over the lease without reason. However, if your request to take over the lease is rejected by the landlord, resulting in non-delivery of the business, then you can also ask to withdraw from the previous purchase and purchase agreement and withdraw your deposit.
Closing date
On the date of the transaction, you are required to pay the seller the balance of the purchase business according to the contract. At the same time as the payment is received, the seller will formally transfer ownership of the business to you. Depending on the business, you will also receive some other documents from the seller, such as leases, business licences, and so on. At the same time, you also need to ensure that you transfer all relevant licenses to your name as soon as possible so that you can continue to do business legally.
Author: Sheng Jing, Australia
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