Share Sale Agreement and Business Sale Agreement – Which Way to Dispose or Acquire a Business

There are two common ways to dispose or acquire a business:


  1. a business sale where ownership of the business assets gets transferred; and
  2. a share sale where the business is owned by a company and ownership of the company gets transferred by way of sales of shares.


The process and the associated risks involved in the above two ways differ and the aim of this article is to explore their differences so that you as the seller or buyer can decide which is the most suitable method to dispose of or acquire a business.6456


Share Sale Business Sale
Ownership of the company and business Ownership of the company passed to the new shareholders.


However, ownership of the business remains with the company, which is unchanged.

Ownership of the company does not pass. The Seller who sells the business continues to own the company which held the business.


Ownership of the business will pass to the buyer entity, which could be a company or individual(s).

Liabilities The ownership of the company which owns the business is transferred to the buyer by way of transfer of shares. Hence, the Buyer, being the new shareholder of the company, take over all of the company’s asset and liabilities (including any historical tax non-compliance). The business assets, such as goodwill, plant and equipment, contracts, stock, land and leases and intellectual property, are transferred to the Buyer.


The Buyer will only take on liabilities for those particular assets which are being transferred if expressed in the Contracts.


The Seller continues to bear the liabilities associated with the shares of the company.

Relevant Document


A share transfer can be affected by lodging a share transfer form and updating the company’s register of shareholders with ASIC.


However, given that the buyer is taking over the company’s liabilities, the buyer would most likely require the parties to enter into a “share sale agreement” which typically contains extensive warranties and indemnities. The share sale agreement may also provide for security to be held in favour of the buyer in the event of a breach of warranties or indemnities.

The parties will enter into a business sale agreement which will document the assets being sold.





The process involves extensive due diligence by the buyers to ensure it is is aware of the assets and liabilities it is taking on.


Given that the ownership of the business remains unchanged, the contracts relating to the business will not need to be transferred.


However, if there are “change of control” clauses in any of the contracts, consent will be required. this is common in government contracts, leases and franchise agreements. If so, you would need to go through a similar process as one under a business sale where consents from third parties are sought and obtained.


The process may involve due diligence by the buyers to ensure the acquisition of assets achieve its commercial objectives.


Given that the ownership of the business will change after settlement, the assets and contracts relating to the business will need to be transferred and consent from third parties may be required. For example, suppliers of the business may have to consent to the buyer taking over supply agreements and the landlord under a lease would have to consent to the lease being assigned to the buyer.


Employment will also have to be transferred by way of novation of the existing employment contracts or termination of the existing contracts and entering into new contracts with the new owner.


IP assets


If the entity which owns the business also owns the IP assets, then no further action is required to effect a transfer of ownership of those IP assets.


If the entity which owns the business does not own the IP assets, then the buyer should consider whether to acquire the entity which owns the IP or require that the IP be transferred to the desired entity.


IP assets such as trademarks and patents are registered with IP Australia. IP Australia should be notified of the change of ownership of the IP.
Stamp duty


In Queensland, generally, stamp duty is not applicable for a transfer of shares in a private or public corporation.

However, duty may still apply if one acquires shares in a corporation that:

●        has land-holdings in Queensland of $2 million or more; or

●        holds property on trust.

In Queensland, stamp duty is applicable to the sale of a business, unless the sale solely involves debts or intellectual property.


Generally, GST does not apply to a share sale. Except if the sale is a going concern, GST is applicable for the transfer or disposal of a business asset if you are registered for GST.


From a Seller’s Perspective

Benefits of a share sale agreement

  1. This is a clean exit between the selling shareholder and the company.
  2. The process might be easier and more straightforward given that existing clients, suppliers and employment contracts remain with the company and the seller is not required to procure new contracts or consents for the buyer.
  3. There may be a better overall return for the shareholder in a share sale transaction which includes access to tax concessions.


Benefits of a business sale agreement

  1. There are fewer warranties and indemnities in an asset sale compared to a share sale agreement.
  2. If there is a pre-emptive rights provision in the company’s constitution or the shareholder’s agreement that impose processes and obligations before the Seller is allowed to sell the shares to another, the Seller may prefer a business sale agreement to avoid such processes and obligations.


From the Buyer’s perspective

Benefits of a share sale agreement

  1. There may be favourable tax implications such as securing tax losses and savings in transfer duty. Please seek professional advice from an accountant in relation to any tax implications.
  2. A buyer may prefer a share sale agreement to secure the transfer of otherwise non-transferable contracts and licences, such as government licences and permits.
  3. Where the company has a recognised brand, goodwill and reputation, it may be preferable to buy the business by way of a share sale in order to capitalise on the company’s brand, goodwill and reputation.
  4. This method may preserve customer relationships as there is no need to formally assign contracts and seek a third party’s consent. However, kindly take note that consent may still be required if contracts or leases contain a “change in control” clause.


Benefits of a business sale agreement

  1. A buyer does not take over all liabilities of the company which owns the business.
  2. A buyer is able to select the assets and liabilities that one wishes to take on.



The legal documents, process and associated risk with a share sale and a business sale vary. Hence, the decision as to how a sale should be effected should be made in consultation with your accountant and lawyers.


Please contact the writer should you wish to discuss or require assistance with your business sale or purchase.


The blog published by Rostron Carlyle Rojas Lawyers is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the author. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.

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