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Business and Franchise

VIC

This publication guides practitioners through the sale or purchase of a business or franchise in Victoria.

4 Matter Plans

Overview

The Sale and Purchase of Business commentaries set out the tax consequences of sale price apportionment, explain the tax treatment of stock, long service leave and other employee entitlements, consider the status of the premises and any franchise agreement, and discuss many other important issues affecting business conveyancing.

The Reference materials folder includes guidance on electronic signing and remote witnessing, and the Getting the matter underway folder contains essential compliance and client engagement documents. The comprehensive Retainer Instructions ensure that all necessary information is gathered from the client at the outset of the matter.

The By Lawyers Uniform Contract for Sale of Business covers all aspects of the transaction from pre-exchange vendor warranties and purchaser guarantees, by shareholders where applicable, to completion, the effective release of PPSR security interests, the transfer of business assets including copyright works, trade marks, supplier contracts and the ASIC requirements for the transfer of the business name.

The contract also customises the competition restraints so they are enforceable, binds the key people, and deals with confidential information and non-solicitation of staff and customers.

The Franchise commentary is a comprehensive manual on franchise agreements.

The Business Structures and the Comparative Table guide provides a comparison of the pros and cons of different business structures.

Also included is 1001 Conveyancing Answers (VIC), which is a useful reference guide.

Precedents in this publication include:

  • Uniform contract for sale of business;
  • Library of special conditions;
  • Library of other contracts, licences, and agreements;
  • Settlement adjustment sheet;
  • Suite of letters to the client, the other side, and relevant authorities;
  • Relevant notices;
  • Client enclosure – Summary of relevant considerations.
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4 Matter Plans Included

  • Item icon ALERTS - Nil
  • Item icon Full Commentary - Sale of Business (VIC)
  • Folder icon Reference materials
    • Item icon AI Prompts
      An AI prompt defines a specific task for AI to perform, like drafting a particular document, and provides clear instructions on how to execute that task. The goal is for the AI to quickly create a useful first draft of a document, which the user verifies and refines into a final version, ultimately ...

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    • Item icon Looking to the Future
    • Item icon Electronic Signing and Witnessing
    • Item icon 101 Costs Answers
    • Item icon 1001 Conveyancing Answers (VIC)
    • Item icon Company tax rates
    • Item icon Individual income tax rates
    • Item icon Further information
  • Item icon Overview
    Before considering the requirements for the sale of a business, it is critical to understand the structure in which the business is held and the tax consequences of the intended transaction. If the business is owned by a company or trust, consideration should be given to the different tax outcomes ...

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  • Folder icon A. Getting the matter underway
    • Item icon File cover sheet - Sale of business
    • Item icon To do list - Sale of business
    • Item icon First steps
    • Item icon Client details and verifying identity
    • Item icon Retainer instructions - Sale of business
    • Item icon Conflict of interest check
    • Item icon Initial letter to vendor enclosing cost agreement
    • Item icon Initial letter to vendor no instructions yet
    • Item icon Costs agreement - VIC
    • Item icon Scope of work - Sale of business
    • Item icon Standard costs disclosure form for clients - Fees under $3000
    • Item icon Time and costs estimates
    • Folder icon If required - Updating costs disclosure
      • Item icon Letter to client updating costs disclosure
      • Item icon Charge securing costs
      • Item icon Guarantee securing costs
      • Folder icon Costs disclosure before settlement in litigation matters
        • Item icon Letter to client - Costs disclosure before settlement - NSW, VIC, and WA
        • Item icon Letter to client - Costs disclosure before settlement - QLD, SA, TAS, ACT, and NT
    • Item icon Enclosure - Summary of relevant considerations
    • Folder icon If required - Authority to contact accountant
      • Item icon Authority to contact accountant
    • Item icon Initial letter to agent
    • Folder icon If required - Acting for both parties
      • Item icon Letter to client acknowledging we act for both parties
    • Folder icon If required - Verification of identity
      • Item icon Verification of identity certificate
    • Folder icon General deeds, agreements, execution clauses, and statutory declarations
      • Item icon Deeds and Agreements
      • Folder icon Deeds
        • Item icon Deed for general use
        • Item icon Deed of guarantee
        • Item icon Deed of release
        • Item icon General deed of indemnity
        • Item icon Deed of assignment of agreement
        • Item icon Deed of gift
        • Folder icon Library of standard clauses for deeds
          • Item icon Amendment
          • Item icon Confidentiality for defined information - All parties
          • Item icon Confidentiality for defined information - One party
          • Item icon Confidentiality for terms of deed - All parties
          • Item icon Confidentiality for terms of deed - One party
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Agreements
        • Item icon Agreement for general use
        • Item icon Heads of agreement
        • Item icon Non-disclosure agreement - Formal
        • Item icon Non-disclosure agreement - Informal
        • Folder icon Library of standard clauses for agreements
          • Item icon Amendment
          • Item icon Confidentiality for defined information - All parties
          • Item icon Confidentiality for defined information - One party
          • Item icon Confidentiality for terms of agreement - All parties
          • Item icon Confidentiality for terms of agreement - One party
          • Item icon Costs
          • Item icon Counterparts
          • Item icon Dispute resolution
          • Item icon Events beyond control
          • Item icon Governing law and jurisdiction
          • Item icon Interpretation
          • Item icon No assignment
          • Item icon Notices
          • Item icon Severance
          • Item icon Waiver
          • Item icon Whole agreement
      • Folder icon Execution clauses
        • Folder icon Library of execution clauses for agreements
          • Item icon Attorney
          • Item icon Authorised officer
          • Item icon Company
          • Item icon Company - Sole director
          • Item icon Individual
          • Item icon Individual - No witness
        • Folder icon Library of execution clauses for deeds
          • Item icon Attorney
          • Item icon Authorised officer
          • Item icon Company
          • Item icon Company - Sole director
          • Item icon Individual
      • Folder icon Statutory declarations
        • Item icon Commonwealth statutory declaration
        • Item icon Statutory declaration - blank - ACT
        • Item icon Statutory declaration - blank - NSW
        • Item icon Statutory declaration - blank - VIC
        • Item icon Statutory declaration - blank - QLD
        • Item icon Statutory declaration - blank - TAS
        • Item icon Statutory declaration - blank - SA
        • Item icon Statutory declaration - blank - WA
        • Item icon Statutory declaration - blank - NT
        • Item icon Standard annexure note for documents
      • Item icon Standard annexure note for documents
  • Folder icon B. Preliminaries
    • Item icon Nature of the transaction
      The sale of a business typically involves:

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    • Item icon Presale due diligence
      Usually, the heads of agreement for sale are negotiated based on limited information provided by the vendor either directly or through a broker. After the heads of agreement is reached, the solicitor is normally instructed. However, at this point, there is normally substantial confidential ...

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    • Item icon The importance of the distinction between income and capital
      Structuring the sale of the business in the most tax advantageous manner presents an opportunity to save the client’s money. The rates of tax payable differ depending on the nature of the asset – whether the asset is a revenue asset or a capital asset – and if the asset is a capital asset, the ...

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    • Item icon The need for presale planning
      Consideration of the tax payable by a vendor is an essential task that must be undertaken before the sale of any business assets. The planning may inform the decision that the business should not be sold at all but rather, the purchaser should be required to acquire the entity that owns the assets ...

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    • Item icon GST
      Goods and services tax (GST) may or may not apply to the sale of a business. The contract needs to deal with it either way. Any obligation to pay GST belongs to the vendor.

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  • Folder icon C. Pre-sale negotiations
    • Item icon Disclosure requirements on a sale
      Section 52 Section 52 of the Estate Agents Act 1980 demands a disclosure statement when a small business is sold, similar to the compulsory disclosure on a sale of real property, or on the creation or transfer of a retail lease. The form of this statement is specified in Schedule 1 to the Estate ...

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    • Item icon Non-disclosure agreement - Formal
    • Item icon Non-disclosure agreement - Informal
    • Item icon Exclusivity deed - Sale of business
    • Item icon Heads of agreement
  • Folder icon D. Contract
    • Folder icon By Lawyers - Uniform contract for the sale of business
      • Item icon Special conditions
        Special conditions should be tailored to the issues relevant to the transaction. They are covered further in this guide, and often include:

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      • Item icon The By Lawyers Uniform Contract for Sale of Business
        The By Lawyers Uniform Contract for Sale of Business is widely used and includes these features:

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      • Item icon Uniform contract for sale of business - Part 1 of 2 - Particulars of sale - By Lawyers
      • Item icon Uniform contract for sale of business - Part 2 of 2 - Terms and conditions - By Lawyers
    • Folder icon Library of contract annexures
      • Item icon Uniform contract for sale of business - Annexure page
      • Item icon Annexure with employee details
      • Item icon Annexure of plant fixtures and fittings
      • Item icon Annexure of registered vehicles
      • Item icon Annexure detailing ongoing agreements
    • Folder icon Library of special conditions for business
      • Item icon Arbitration
      • Item icon Completion - Time is of the essence
      • Item icon Computer software and domain names
      • Item icon Confidentiality
      • Item icon Domain names, websites and email addresses
      • Item icon Exchange on less than 10% deposit
      • Item icon GST payable by purchaser in addition to price
      • Item icon Guarantee for corporate purchaser
      • Item icon Interdependent contracts
      • Item icon Interest to run from expiry of notice to complete
      • Item icon Late completion - Payment of interest
      • Item icon Liquor licence transfer
      • Item icon PPSA - Release of security interest
      • Item icon PPSA - Undertaking by secured party to register release of security interest
      • Item icon Purchaser to comply with outstanding notice
      • Item icon Registered vehicles
      • Item icon Restraint of trade variation of standard clause
      • Item icon Restraint of trade variation of standard clause - Existing clientele
      • Item icon Sale of rent roll business
      • Item icon Software
      • Item icon Transfer of business name
      • Item icon Vendor to comply with outstanding notice
      • Item icon Trial period
    • Item icon Section 52 statement by a vendor of a small business
    • Folder icon If required - Transfer of lease and disclosure statements
      • Item icon Transfer of lease
      • Item icon Disclosure statement for non-shopping centre retail premises
      • Item icon Disclosure statement for shopping centre retail premises
    • Folder icon Library of other contracts, licences and agreements
      • Item icon Agreement for sale of units in a unit trust
      • Item icon Non-disclosure agreement - Formal
      • Item icon Non-disclosure agreement - Informal
      • Item icon Contract for sale of a rent roll
      • Item icon Contract for sale of personal property
      • Item icon Agreement for sale of shares - Concise
      • Item icon Agreement for sale of shares - Extensive - Company takeover
      • Item icon Deed of assignment of lease
      • Item icon Deed of assignment of agreement
      • Item icon Deed of restraint of trade
      • Item icon Distribution agreement
      • Item icon Intellectual property licence
      • Item icon Licence of business name
      • Item icon Licence of copyright
      • Item icon Medical centre licence agreement
      • Item icon Option to purchase
      • Item icon Nomination
      • Item icon Short licence agreement of business and premises
      • Item icon Trade mark agreement
      • Item icon Transfer of domain name
    • Item icon Taxation considerations for the vendor
      Apportionment of the sale price – Depreciation It is customary, but not necessary, for the contract to show an apportionment of the sale price between the various assets that make up the business. Normally, the apportionment will be confined to identifying the part of the price attributed to ...

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    • Item icon Motor vehicles
      Although there is no duty on business sales, duty is payable on the transfer of motor vehicles, even if as part of a business sale. Duty is payable on the sale price or market value, whichever is the greater: Transfer and motor vehicle duty fees.

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    • Item icon Liquor licence
      The Victorian Liquor Commission provides licensing, investigative, disciplinary and other regulatory functions under the Liquor Control Reform Act 1998 and regulations relating to the supply and consumption of liquor in Victoria. The Department of Justice and Community Safety performs various ...

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    • Item icon Service providers, domain names, web sites, email and social media accounts
      When purchasing or selling a business that has a website, domain name or email, it is important to contact the internet service provider to advise them of the sale and the new owners’ details. They will assist in arranging for the transfer of the domain name registration. The worldwide Domain Name ...

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    • Item icon Employees
      When an employer buys or sells a business, the sale may affect the employment and entitlements of employees already working for the business. The transfer of business provisions of Part 2-8 of the Fair Work Act 2009 deal with situations where a business is transferred from one employer to another. ...

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    • Item icon Business names
      Although business names are not strictly intellectual property in the sense that trademarks are, it is clear that they can have substantial value. Every business name must be registered with the Australian Securities and Investments Commission (ASIC) unless the proprietor is trading under their own ...

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    • Item icon Trade marks and patents
      The intellectual property owned by the company or business may constitute a valuable part of its overall assets. When preparing the assets for sale, take care to identify these components and ensure that they are transferred if required on the sale. Ideally, the vendor would maintain a register of ...

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    • Item icon Vendor finance
      Purchasers commonly purchase on a vendor finance basis, in place of obtaining finance from a third party lender, requiring a vendor finance special condition. Generally, the purchaser is responsible for the legal costs of preparing vendor finance documentation. Payment of the outstanding balance ...

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    • Item icon Retention
      Occasionally, a retention of all or part of sale proceeds is required to secure the performance of some obligation of the vendor. Such obligations can be remaining in employment with the business, conducting repairs on equipment, or key clients remaining with the business.

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    • Item icon Earn outs
      These are increasingly common in business sale transactions. An earn out is a contractual provision providing that the vendor is entitled to further sale proceeds on the provision that the business meets certain financial expectations. From a vendor’s perspective, particularly when they are no ...

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    • Item icon Pre – payments
      Pre-payments, for example, lay buys or gift vouches, are usually adjusted at settlement in favour of the purchaser. For businesses which rely on memberships, such as gyms, these adjustments can be complicated, particularly when there may be hundreds of members. Sometimes, it may be appropriate to ...

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    • Item icon Food licence
      For businesses where a food safety licence is required to continue the operation of the business, a special condition is required for the transfer of the food licence.

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    • Item icon Tax including GST, and CGT with the small business concessions
      The objective is to incur the minimum tax liability arising from the sale. The tax rates applicable to the proceeds of sale depend on whether the asset sold is a revenue asset or a capital asset. Revenue assets are generally trading stock, plant and equipment, intellectual property, and land ...

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    • Item icon GST in more detail
      Liability for GST The vendor has no statutory right to pass on a GST liability to the purchaser. The right to recoup GST on taxable supplies will only be a contractual right.

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    • Item icon Capital gains tax
      Capital gains tax concessions Capital gains made on assets disposed of after 11.45 am ACT time on 21 September 1999 may be reduced by the discount CGT concession in Division 115 of the Income Tax Assessment Act 1997 and the various small business CGT concessions in Division 152.

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  • Folder icon E. If required - Franchises
    • Item icon Franchises
    • Item icon Model disclosure document for franchisee or prospective franchisee
    • Item icon Information statement for prospective franchisee – ACCC
    • Item icon Enclosure - Issues for a prospective franchisee to discuss with an existing or former franchisee
    • Item icon Franchise agreement
    • Item icon Independent advice statement and certificates
    • Item icon Deed of prior representations
    • Item icon Clause - Sale subject to franchisor's consent and suitable franchise agreement
    • Item icon Clause - Seeking franchisor's consent to sale
  • Folder icon F. Negotiations and exchange
    • Item icon Letter to purchaser's solicitor submitting contract
    • Item icon Letter to vendor to come and sign contract
    • Item icon Letter to vendor with contract for signing
    • Item icon Letter to purchaser's solicitor with contract by way of exchange
    • Item icon Letter to purchaser's solicitor effecting telephone exchange
    • Item icon Letter to purchaser's solicitor after telephone exchange
    • Item icon Letter to vendor following exchange
    • Item icon Letter to agent confirming exchange
    • Folder icon If required - Lessor
      • Item icon Letter to lessor's solicitor seeking deed of assignment
  • Folder icon G. Mid transaction
    • Item icon ASIC – Update business name
    • Item icon ASIC – Transfer business name
    • Item icon ASIC – Cancel business name
    • Item icon Liquor Portal – Transfer a liquor licence
    • Item icon Letter to discharging mortgagee for discharge
  • Folder icon H. If required - Notices
    • Item icon Notice to complete
    • Item icon Notice of termination
    • Item icon Notice of rescission
    • Item icon Letter to other side serving notice
    • Item icon Letter to other side's solicitor serving notice
    • Item icon Letter to other side's solicitor disputing notice to complete
  • Folder icon I. Settlement
    • Item icon Adjustments
      Depending on the type and size of the business it will be necessary to adjust some of the following expenses.

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    • Item icon Other actions that may be required
    • Item icon Statement of Adjustments
    • Item icon Direction to pay to purchaser's solicitor
    • Item icon Letter to agent notifying date and time of settlement
    • Item icon Letter to agent when deposit required at settlement
    • Item icon Letter to agent with order on agent or cheque for commission
    • Item icon Letter to vendor with settlement figures and our account
  • Folder icon J. Finalising the matter
    • Item icon After settlement letter to vendor
    • Item icon Example invoice incorporating notification of client's rights - VIC
    • Item icon Invoice recital - Sale and purchase of business
    • Item icon Closing the file
    • Item icon File closing checklist
  • Item icon Comments and suggestions for By Lawyers

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