In New South Wales, the process of buying a business involves a number of steps and each steps requires careful consideration to ensure that the ownership of the business is successfully transferred. In this article, we will explain the number of steps involved in the process of buying a business.
Determine the value of estate
If the value of the estate is less than $50,000, then it is classified as a small estate. If you are the executor of a small estate, chances are you may not need to apply for a Grant of Probate to access the deceased’s assets. In this event, you shall contact the deceased’s bank or other financial institution to find out whether they require a Grant a Probate to release fund.
If you believe you do not need to apply for a Grant of Probate, before you proceed to distribute the deceased’s asset, you shall contact a solicitor or the Supreme Court Registry Probate Division on (02) 9230 8111 to confirm this.
Exchange of contract
The vendor (or the vendor’s lawyer) will provide you with a formal Contract of Sale. In New South Wales, usually a Standard Contract for the Sale of Business is used for the purchase of business. This contract contains extensive clauses that cover all legal requirement under Australian Law. However, depending on the special nature of different business, the contract may include special conditions in addition to the Standard Contract for Sale of Business.
At this stage, you may negotiate with the vendor if there is terms or conditions in the contract that you do not agree with. After all the negotiations and the contract terms have been settled, you and the vendor may proceed to the signing and the exchange of contracts. At the time of contract exchange, the vendor will usually require you to pay deposit (normally 10% of the agreed purchase price).
During this stage, you will be required to fulfil a range of obligations outlined in your contract of sale. These may include the obligations in the standard condition as well as those contained in the special condition. Some usually obligations are as follows:
- Obtain finance (if required) to complete the purchase;
- Getting the lessor’s consent to transfer the lease from the vendor to you; and
- Procure the transfer the transfer of any other license, agreement if provided by the contract of sale.
At settlement you will be required pay the balance of the purchase price to the vendor and in exchange the vendor will pass you the ownership of the business. Upon settlement, you may also receive a range of document which pass the ownership rights to you such as the share transfer or share certificate (if the purchase is by way of share transfer).
After settlement of the purchase of business, you must take all necessary steps to ensure that any all license or agreement (if they are to be takeover from the vendor) has been appropriately transferred.
You will also be liable for the stamp duty and it shall be paid within 3 months from the date of exchange contract.