It is often assumed that the sale/purchase of a business does not need to involve a written contract or a lawyer. There are, however, many potential dangers which need to be sorted out properly at the time of the sale in order to prevent them coming back to haunt the parties in the future.
A new law called the Personal Properties Securities Act (PPSA) commenced on the 30th of January, 2012. That law set up the Personal Property Securities Register (PPSR) which is an online Australia wide register. The law defines “Personal Property” to include property often included in a sale of business, such as shop fittings, air conditioning equipment, phones, kitchen equipment, coolrooms/fridges, office or shop fit-outs, shelving racks,etc.
If someone else such as the previous owners’ bank has registered a claim over these items on the Register (PPSR), the purchaser of the business may have to give those items to the bank even though the purchaser paid for those items. A purchaser can search the Register before paying the purchase monies to make sure there are no pre existing registered claims and then register their claim once they have bought the property to protect themselves. We can help you with this.
There is usually a lease over the shop or factory from which the business operates. The landlord may want to keep the outgoing business operator liable if the new owner does not pay the rent or the outgoings for the rest of the term of the lease. It is, however, possible in some situations to force the landlord to release the outgoing person from any continuing liability even if the landlord does not want to do so. We can help you with this.
Similarly, unless steps are taken to ensure that any employees’ accrued entitlements become the responsibility of the new business owner, then if the new owner fails to pay the employees’ long service entitlements those employees may be able to chase the previous owner of the business. There are some steps that can be taken during the sale process to protect the outgoing person from such claims.
If the owner of the shop/factory from which the business currently operates sells the property, the new owner may be able to terminate the lease at any time unless it has been registered on the title to the land. Not all forms of written Leases can be registered however. It is important to make sure that the right form of Lease is used therefore.
If problems such as those referred to above arise, the cost to the parties will be far greater than what it would have been if the sale had been handled properly in the first place.
Additionally there is the peace of mind that comes from knowing that you do not have to be worried about problems in the future.
We recommend that you come and see us for an initial no-obligation meeting to find out whether or not you should have a solicitor involved in the transaction.