In short
A business sale agreement transfers a business by selling its specific assets — plant, stock, goodwill, contracts, IP and (usually) transferring employees — rather than selling shares in the entity that operates it. It's the more common structure for small and mid-sized business sales because it lets a buyer avoid inheriting undisclosed liabilities of the seller's company. Employee transfers under this structure are governed specifically by the Fair Work Act 2009 (Cth)'s transfer of business provisions.
Why an asset structure is the default for smaller business sales
Where a buyer is acquiring a business rather than an entire corporate group, an asset sale lets them specify exactly which assets, contracts and liabilities transfer, leaving everything else — including undisclosed debts, historical tax exposure and unrelated litigation — with the seller's existing entity. This is the main reason asset sales dominate small and mid-market transactions: the buyer gets a clean list of what it's acquiring rather than inheriting a company's full history the way it would in a share sale. The trade-off is that every asset, contract and licence needs to be identified and individually assigned or transferred, which makes the schedules to the agreement do most of the real work.
Identifying and scheduling the assets
The agreement's asset schedule needs to precisely list what's included — plant and equipment, stock and inventory (often valued and adjusted at completion), business names, goodwill, intellectual property, customer and supplier contracts, and any real property lease. Equally important is what's excluded — cash at bank, debtors as at completion (usually collected by the seller), and any personal assets — because vague drafting around the boundary between included and excluded assets is one of the most common sources of post-completion disagreement.
Assigning contracts and dealing with consent requirements
Business contracts generally can't be assigned to a new operator without the counterparty's consent, so the agreement needs a mechanism for identifying material contracts requiring consent (leases, key supplier or customer agreements, equipment finance), obtaining that consent before or shortly after completion, and dealing with contracts where consent is refused or delayed — commonly through an interim arrangement where the seller continues to hold the contract on trust for the buyer's benefit until it can be formally assigned. We flag this early in due diligence because a business's most valuable contracts are often the ones with the strictest assignment or change-of-control clauses.
Employee transfers under the Fair Work Act
Where employees are transferring to the buyer, the sale needs to address whether the buyer is offering employment to some or all of the seller's staff, and if so, whether prior service is recognised for entitlements like redundancy and leave. This engages the transfer of business provisions in Part 2-8 of the Fair Work Act 2009 (Cth), under which a new employer can, in some circumstances, be bound by the outgoing employer's enterprise agreement or modern award coverage arrangements if the work is the same or substantially similar and there's a transfer of assets or outsourcing arrangement connecting the two employers. We also address annual leave and long service leave liability apportionment between seller and buyer, which is a frequent point of price adjustment at completion.
Goodwill, restraint of trade and non-compete
Because goodwill is usually a significant part of the purchase price, the agreement includes a restraint of trade preventing the seller from competing with the business or soliciting its customers, staff or suppliers for a defined period and area after completion. The restraint needs to be calibrated to what the business actually does and where it operates — restraints copied from an unrelated precedent and not sized to the specific business are vulnerable to being read down or held unenforceable if challenged, which defeats the purpose of paying for goodwill in the first place.
Completion, apportionments and post-completion adjustments
At completion, the parties typically apportion outgoings like rent, rates and utilities as at the completion date, finalise a stock take and adjust the price for any variance from the estimate used at signing, and exchange possession of the premises and business records. We build a specific post-completion adjustment mechanism into the agreement — including a timeframe and dispute process — so that stock, debtor and leave liability adjustments don't become open-ended arguments once the parties have moved on from the transaction.
What the fixed fee covers
- Detailed asset schedule distinguishing included and excluded assets
- Contract assignment strategy and consent mechanism for key agreements
- Employee transfer terms addressing Fair Work Act transfer of business provisions
- Restraint of trade calibrated to the specific business and its market
- Completion mechanics with stock take and apportionment methodology
- Post-completion adjustment and dispute process
Mistakes we see
- Vague asset schedules that leave the boundary between included and excluded assets unclear
- No plan for contracts that require third-party consent to assign
- Ignoring transfer of business obligations under the Fair Work Act when staff move across
- Restraints not sized to the specific business, risking unenforceability
- No completion-day stock take or apportionment mechanism, guaranteeing a later dispute
Who this is for
- Owners selling a trading business rather than a corporate group
- Buyers who want to acquire specific assets without inheriting the seller's liabilities
- Franchise and retail business transfers
- Sales involving employee transfers to a new operator
Frequently asked questions
- Why would we do an asset sale instead of a share sale?
- An asset sale lets the buyer choose exactly which assets, contracts and liabilities it takes on, leaving undisclosed risks in the seller's existing company. It's the more common structure for small and mid-market business sales for that reason, whereas share sales suit buyers who need the whole corporate entity intact, such as where key licences or contracts sit with the company itself.
- What happens to employees when a business is sold?
- The buyer decides whether to offer employment to some or all of the seller's staff, and the agreement records whether prior service is recognised. Part 2-8 of the Fair Work Act 2009 (Cth) can, in some circumstances, carry over enterprise agreement or award coverage obligations where the new employer takes on the same or substantially similar work.
- Can all our business contracts be transferred to the buyer?
- Only with the counterparty's consent in most cases, since contracts generally can't be assigned unilaterally. We identify material contracts early in due diligence and build a consent process into the agreement, with a fallback arrangement for any contract where consent is delayed or refused.
- Is a restraint of trade clause always enforceable?
- Not automatically — a restraint is enforceable only to the extent it's reasonably necessary to protect the goodwill being sold, in scope, duration and geography. We size restraints to the actual business rather than using a generic clause, since an overly broad restraint risks being struck down entirely.
- How is the purchase price adjusted at completion?
- Typically through a stock take reconciled against the estimate used at signing, apportionment of outgoings like rent and rates as at completion, and any agreed adjustment for accrued but untransferred employee leave liabilities. We build a specific timeframe and dispute mechanism for these adjustments into the agreement.
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