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Buying Shares & Businesses

ABOUT PURCHASING SHARES IN A BUSINESS

If you are intending to buy all the issued shares in a privately-held company, you will need a Share Purchase Agreement. If you are purchasing the business and not the shares, you will need a Business Purchase Agreement instead.

You should also undertake Due Diligence and utilise a Due Diligence Checklist to review the assets and structure of the entity to determine any risks and liabilities being acquired.

You should also make sure that a share or business purchase transaction is properly protected for confidentiality. The Confidentiality Agreement for Buying/Selling a Business is specifically for this purpose. Due diligence is an important process essential to minimising and understanding your risk.

You should also be aware of the requirements for a Company Constitution. We have an online contract template available for a Company Constitution and an explanation of how and when this should be used.

Some Limitations

The template Share Purchase Agreement should not be used, or will require legal advice, if it is to be used:

where the vendor of the shares does not represent all the shareholders in the company;
if the purchaser is purchasing shares held by the vendor in a trust;
if the vendor is required to provide consulting services to the company after the purchase;
if the purchase price is to be subject to any complex formulae, deferred payment or includes non-cash consideration;
for an unusual or complex acquisition.

If you are purchasing shares in a business you should also consider the need for a Shareholders' Deed.

If you are being issued with new shares by the Company and not buying shares from an existing shareholder you should consider the Share Subscription Agreement.

ABOUT PURCHASING A BUSINESS

If you are buying the business but not the assets of a company you will need a Business Purchase Agreement to ensure that the business is a going concern.

Prior to entering into or completing an agreement to purchase a business you may want to conduct due diligence on the business and vendor. Note that conducting due diligence to determine whether there are any risks being acquired with the purchase of the business is an important process. We have provided a Due Diligence Checklist to assist you with this process.

Some Limitations

The Business Purchase Agreement should not be used, or will require amendments if it is to be used, for:

a business that is not conducted in Australia;
a business where the goods are manufactured outside Australia;
the vendor is required to continue to work in the business;
a vendor which is not a company;
the business is complex, includes the acquisition of real estate or unusual assets;
the purchase price is deferred, paid in instalments or subject to calculation by a formula.

You should also make sure that a share or business purchase transaction is properly protected for confidentiality. The Confidentialy Agreement for Buying/Selling a Business is specifically for this purpose.

Next, learn about why you need agreements for purchasing a business or shares in one.

Why you need agreements for purchasing a business Risks of not having purchase agreements Key Commercial Issues for buying a business About Due Diligence About Shareholders' Deeds About Share Subscription Agreements

Business Purchase Agreement Share Purchase Agreement Share Subscription Agreement Due Diligence Checklist Confidentiality Agreement for Buying/Selling a Business Shareholders' Deed

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