Buying a business by purchasing the shares in a company can often be better than buying the assets of the business itself.

The business’ existing contracts with customers, suppliers and employees all stay in place however there are several important documents and steps required to ensure you obtain proper legal title to the shares and the business.

Our rates and fixed prices are lower than the prices charged by many Perth Commercial law firms because our Perth and Fremantle offices don’t pay the exorbitant St George’s Tce rent that many commercial law firms choose to pay.

Further information can be found here regarding our fixed fees.

If you are purchasing a company’s shares then it is necessary that a share sale agreement is prepared. It is very important that this document is given the attention it deserves. A properly drafted share sale agreement will, among other things, set out the following terms:

  • the number of shares you will purchase and the purchase price that you will pay for the shares;
  • the method of payment such as whether payment for the shares will be in a lump sum or by instalments;
  • any conditions that need to be satisfied before the sale can be completed;
  • the obligations on completion required to transfer legal ownership of the shares and any warranties to be provided by the seller regarding the shares, business and company;
  • any non-compete provisions to prevent the seller from operating a similar business after completion; and
  • dispute resolution and confidentiality provisions.

Usually, the seller’s lawyer will draft the share sale agreement and your lawyer will review it. More often than not, the seller’s lawyer will draft the share sale agreement to be very favourable to the seller.

Therefore you will need to negotiate which can take anywhere from a few weeks to a few months.

There are critically important warranties included in most share sale agreements.

We can guide you through this process and explain the critical legal points.

Buying a business through the purchase of shares in a company means that the buyer then takes ownership of the business’ past trading risks. These past trading risks include such matters as any debts owing to the ATO, other creditors or work done for customers.

The first step to protect yourself as the buyer from any of these potential risks is to perform a thorough due diligence on the company. This should involve both legal and financial due diligence.

We can assist by conducting searches of the company and reviewing key contracts to ensure that key clients are locked in.

With respect to the financial due diligence, your accountant or financial adviser should review the business’ financial records and provide you with advice regarding the value of the business and any potential risks relating to taxation, payroll and superannuation they may uncover during such due diligence.