Contract of sale when selling a Business in South Australia – What Documentation is Required?

It is recommended a solicitor draw up the sale contract for you. The solicitor needs to be in the same state your business (head office) is in, as laws slightly differ in Australia by state.

The two main documents are: A Contract of Sale and a Vendor’s Statement also known as a Form 2 or a Disclosure Statement.

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A Contract of Sale – (Business Contract) for South Australia

A contract of sale agreement is a binding document signed by both the Vendor and the buyer. Regulations (Sale and Conveyancing) Act 1994 (Act) known as a ‘standard form contract’ which is typically used in most sales of a small business in South Australia. Although it is not compulsory to use, this standard contract is a widely accepted practice. Contract of Sale contains the following:

Contract of Sale contains the following:

Business name and description
Vendor’s Details
Purchaser’s Details
Covenators (e.g. a director(s) of the Vendor or Shareholder(s) of the Vendor
Purchase Price
Deposit
Balance of Purchase Price
Purchase Price apportionment – Assets, Goodwill etc
Stock Valuer – if applicable
Assistance Period (number of days before and after completion
Restraints (e.g. any restrictions of trade after sale) – and restraint periods
Conditions: e.g. subject to finance
Employees: The sale may be conditional to keep certain employees, if so they need to be names.
Premises Lease Details (details of the lessor, registration number, expiry and options remaining)
Motor Vehicles – Details including registration, make, model and any encumbrances being transferred to the purchaser.
Leased Equipment – Particulars of lessor, make, model, remainder owning and duration of lease
Hired Equipment – particulars of hire agreements and the terms
Intellectual Property Rights – Description and details of any licences, including term and ongoing fees etc.
Business Contracts and Arrangements – Particulars of other party, key terms and duration
Excluded Assets – Particulars of any assets not being transferred with the business

Vendor's statement or (‘Form 2’ in South Australia)

When selling a small business, the seller might need to give the prospective buyer a vendor's statement (or ‘Form 2’) before the contract of sale is signed. The statement includes important financial and tax information about the business. A ‘Form 2’ is a disclosure statement that must be provided by a vendor to a purchaser of a small business under the Land and Business (Sale and Conveyancing) Act 1994 (Act). This form is usually prepared by your accountant or solicitor using the form prescribed. A ‘Form 2’ is required if you are selling a “small business”. The Act defines a small business with the total purchase price of the business is $300,000.00 or less. Even if the business is being sold for $5,000.00 you still need to provide the statement. It can also apply even when you think the total price might exceed $300,000.00. This is because the $300,000.00 excludes: No Agent Business are licensed brokers but do not charge any commission upon sale. GST The value of any stock in trade that is sold under the contract; and If land is being sold as part of the business, the purchase price of that land. The ‘Form 2’ contains details relating to the business being sold and must take the form set out in the regulations to the Act. It must include: The purchaser’s “cooling-off” rights; The prescribed particulars required under Schedule 1 of the regulations, relating to: A summary of the financial performance of the business being sold; The depreciated value of the plant and equipment being sold; Trading statements for the last 3 financial years; Other particulars, including the period of time the vendor has been carrying on the business and the trading from the business premises, the lease terms, workplace, employees, and so forth; and A certificate signed by or on behalf of a qualified accountant (not the vendor) certifying that the accountant has examined the accounts of the business and that the financial particulars disclosed on the Form 2 appear to be in conformity with the accounts of the business. No Agent Business are licensed brokers but do not charge any commission upon sale. --> See our checklist to selling a business --> See our Selling Service Packages