When purchasing a business it is important to ensure that a legal practitioner, accountant and if possible a financial adviser has had an opportunity to advise you and to have a look over all of the documents relating to the purchase of your proposed business.
It is equally important to ensure that a lawyer and an accountant has prepared all of the correct documentation when selling a business.
For certain small businesses it is usual to have a disclosure document made available to potential purchasers by the vendor or the vendor’s agent (usually an estate agent or business broker). This document is commonly referred to as a section 52 statement, as it is required under section 52 of the Estate Agents Act 1980 (Vic).
The section 52 document must be prepared by the accountant of the vendor and should include the previous two financial year’s details. It is common for vendors of small businesses not to include a section 52 document along with other documentation when proposing to sell their business, however this is not recommended as it may make the agreement between a purchaser and a vendor avoidable by the purchaser in which case the deposit and other money must be fully refunded.
In any event, whether or not a section 52 document is applicable or not, or, whether or not it has been supplied or not, it is advisable for the purchaser to have a due diligence period or a trial period which allows for the purchaser to determine the level of sales and income of the business which they are intending to purchase.
Other considerations a buyer should have when looking at a business to purchase include:
- Looking at the details of the current lease, including the remaining term as well as further options and also the permitted use allowed within the lease;
- Looking at any other material contracts such as the equipment hire agreements, licensing agreements with regards to the use of any business name or inclusion in any stock buyers alliance or franchise which may be applicable;
- Looking at the employment contracts of any of the employees who will continue working for the business under new ownership, including any applicable award coverage (including whether the current business owner has been legally compliant or not);
- Many other factors which your legal practitioner, accountants or financial adviser may deem important.
Contact Esquire Lawyers for more information with regards to business conveyancing if you are thinking of selling a business or thinking of buying a business.