Contract of Sale of Business in Victoria: Practical Guide

Buying or selling a small business is one of the biggest commercial decisions you’ll make. You’re not just handing over keys and a social media login - you’re transferring goodwill, customer relationships, staff arrangements, leases, equipment, stock, and often some risk you didn’t expect.

If you’re doing a business sale in Victoria, one document sits at the centre of the whole transaction: the contract of sale of business. Many business owners also start by searching for the LIV contract of sale of business (as a familiar Victorian template used in many deals).

But here’s the practical reality: even if you start with a standard form, what protects you (or exposes you) is the way the contract is completed, negotiated, and matched to your specific deal.

This guide walks you through what the contract does, what to look out for, and how to manage the process so you can buy or sell with confidence. (This article is general information only and isn’t legal, tax, or financial advice.)

What Is A Contract Of Sale Of Business (And Why The LIV Contract Of Sale Of Business Matters)?

A contract of sale of business is the legal agreement that sets the rules for the transaction. It covers:

• what is being sold (assets, goodwill, IP, stock, etc.)
• the price and how it’s paid
• what happens before settlement (conditions and handover steps)
• what happens at settlement (documents, payments, transfer of possession)
• what happens after settlement (restraints, training period, warranties, adjustments)

In Victoria, people often refer to the LIV contract of sale of business when they mean a commonly used standard-form template that many agents and advisors are familiar with. It can be a helpful starting point, but it isn’t “official” legal advice and it still needs to be completed correctly for your specific deal.

Standard forms can be helpful because they provide structure, but they are not a substitute for:

• clear drafting of what is actually included in the sale
• deal-specific special conditions (for example, finance, landlord consent, stock valuation method)
• a proper due diligence process
• legal advice tailored to your business, your risks, and your goals

If you’re selling, you want certainty and a clean exit. If you’re buying, you want clarity about what you’re really getting - and what you’re not.

Asset Sale Or Share Sale: Which Deal Are You Actually Doing?

Before you get too deep into the contract, you need to be clear about what type of transaction you’re entering. In Australia, business sales usually happen as either:

• Asset sale: you buy specific business assets (like plant and equipment, stock, customer lists, IP, goodwill), and the seller typically keeps their existing entity and its historical liabilities - but some liabilities can still transfer depending on the contract and the way the business is transitioned.
• Share sale: you buy the shares in the company that owns the business, meaning you step into the company “as-is” (including its contracts, assets, and potential liabilities).

Why This Changes The Contract (And Your Risk)

In an asset sale, the contract needs to be very specific about what assets transfer and what stays behind. In a share sale, the contract focuses more on warranties, disclosures, and protections relating to the company’s history.

For example, if the “business” is operated through a company, and the seller wants a share sale, you’ll often need to deal with issues like:

• director warranties about accounts, debts, tax, and compliance
• who controls bank accounts and software subscriptions
• what happens to existing staff entitlements
• whether there are shareholder approval requirements or internal restrictions on transfer

Where shares are involved, you may also need to document the transfer of shares properly so the ownership change is clear and enforceable.

Key Clauses To Check In A Victorian Contract Of Sale Of Business

A contract can look “standard” at first glance, but small details inside the clauses (and the special conditions) are often where deals go right - or go sideways. Below are the practical contract areas small business owners should pay close attention to.

1. What’s Included In The Sale (And What Isn’t)

This sounds obvious, but disputes commonly happen because the buyer assumed something was included and the seller assumed it wasn’t.

Make sure the contract clearly covers:

• Plant and equipment: list items or attach an inventory schedule
• Stock: whether it’s included, and if so, how it’s valued
• Intellectual property: business name, domain, website content, branding, software, phone numbers
• Goodwill: what the buyer is paying for beyond physical assets
• Records and data: what customer/supplier data transfers and how privacy is handled

2. Purchase Price, Deposit, And Adjustments

Most business sales involve:

• a deposit paid on signing
• the balance paid at settlement
• adjustments for items like rent, outgoings, employee entitlements, and sometimes prepaid expenses

Be clear about timing and how adjustments are calculated. If the business has fluctuating stock levels or seasonal revenue, you’ll want a method that’s fair and practical.

3. Conditions Precedent (The “Subject To” Clauses)

Common conditions include:

• Finance: buyer needs approval from a lender
• Lease assignment / landlord consent: essential if the business operates from leased premises
• Franchise approvals: if the business is a franchise
• Licences and permits: for regulated industries

These conditions should have:

• a clear deadline
• what the buyer must do to try to satisfy the condition
• what happens if the condition isn’t satisfied (terminate, extend, or waive)

4. Restraint Of Trade (Protecting The Goodwill)

Buyers usually want protection so the seller can’t open the same business nearby and take customers back immediately after settlement.

Restraint clauses can be enforceable if they’re reasonable, but they need to be carefully drafted for the business, location, and industry.

5. Warranties And Indemnities

Warranties are promises about the business, such as:

• the seller owns the assets and can sell them
• there are no undisclosed debts or security interests
• the business has complied with laws
• key information provided is accurate

An indemnity can allocate specific risks (for example, the seller covering a known issue if it arises after settlement). These clauses become particularly important if you’re buying a business with employees, contracts, or historical compliance obligations.

Due Diligence: The Checks You Should Do Before You Commit

Due diligence is the process of verifying what you’re buying (or what you’re selling), and identifying risks before you are locked in. In practice, buyers often do key checks before signing and then complete further checks during the conditional period (before the contract becomes unconditional).

Even if you’re using an LIV contract of sale of business style form, you still need a due diligence plan that fits your transaction.

Common Due Diligence Areas For Buyers

• Financials: BAS, P&L statements, bank statements, sales reports
• Leases: term remaining, options, rent review, assignment clauses
• Staffing: employee entitlements, awards, rostering, contracts
• Key contracts: supplier agreements, customer agreements, distribution arrangements
• Assets: ownership and condition of plant/equipment, vehicles, fit-out
• Licences: whether licences can transfer and what approvals are needed
• Online assets: domain ownership, website access, social accounts, ad accounts

PPSR Checks And Security Interests (Often Missed)

One practical risk is buying equipment that is actually subject to someone else’s security interest (for example, where the seller financed the equipment and the lender registered it).

That’s where a PPSR search can matter - it helps you see whether someone has registered a security interest over personal property (like business equipment).

It’s also worth understanding how a general security agreement can impact a business sale, because it may mean a lender has security over a wide pool of business assets, not just one item.

If you want a more structured process, a Legal Due Diligence Package can help you cover the key legal checks before you commit.

Step-By-Step: How A Business Sale Usually Works In Victoria

Every deal is different, but most Victorian business sales follow a similar pathway. Thinking about the sale as a sequence helps you avoid missing a critical step.

1. Heads Of Agreement (Optional, But Common)

Some parties start with a short document setting out the high-level commercial terms (price, deposit, settlement date, conditions). This can be useful to confirm you’re aligned before spending money on searches and advice.

2. Contract Preparation And Negotiation

The contract should reflect the real deal:

• assets and inclusions
• restraint terms
• training/handover arrangements
• what is required before settlement

This is the stage where it’s often worth having a lawyer review and negotiate the deal documents, including the Business Sale Agreement.

3. Deposit Paid And Conditional Period Begins

Once signed, the buyer usually pays the deposit. If the contract is conditional, this is when finance approval, landlord consent, and other conditions are worked through.

4. Due Diligence, Searches, And Consents

This is where the buyer confirms the business is what it appears to be. The seller should also be actively preparing their side (for example, landlord approvals, payout figures, stocktake plan).

5. Pre-Settlement Handover Planning

Settlement can be chaotic if you leave everything to the last minute. A structured Completion Checklist is often the difference between a smooth handover and a stressful scramble.

6. Settlement (Completion)

At settlement, you typically see:

• payment of the balance of the purchase price
• handover of keys, alarm codes, and access
• transfer or assignment of key assets
• execution of any additional documents (like lease transfer documents)

7. Post-Settlement (Restraints, Training, And Transition)

After settlement, the buyer focuses on continuity (keeping customers, keeping staff stable, ensuring suppliers keep delivering). If the contract includes training or introductions, make sure it’s clearly defined (duration, scope, and expectations).

Common Legal Traps For Small Business Buyers And Sellers (And How To Avoid Them)

Many business sales fall over or end in disputes for reasons that are avoidable with the right preparation.

1. Relying On Informal Promises Instead Of The Written Contract

If it matters, it needs to be written down. That includes:

• “the landlord said it’s fine”
• “the supplier will keep supplying”
• “the seller will stay on for a month”

The contract (and its attachments) is what you can enforce.

2. Not Being Clear On What Customers Are Actually Buying

If you’re selling a business that has pre-paid orders, subscriptions, warranties, or gift cards, you need clarity on who bears those obligations after settlement.

Also, both buyers and sellers need to be mindful of representations made during the sale process - statements in ads or negotiations can become an issue if they are misleading. The elements of misleading or deceptive conduct are particularly relevant in business sales where a buyer relies on what they were told about revenue, expenses, or the customer base.

3. Lease Issues (The Silent Deal-Breaker)

A business can be profitable, but if you can’t secure the premises (or the lease terms are unfavourable), the deal may not work. If the business relies on location, treat lease consent as a major condition and start that process early.

4. Employee Entitlements And Transfer Issues

Employees can be central to the value of a business - especially if relationships and know-how are key. But staff also bring obligations. Make sure the contract clearly addresses:

• who is responsible for accrued leave and entitlements
• whether employees are transferring across (and on what terms)
• what happens if some employees don’t want to transfer

In many sales, employees don’t automatically “transfer” in a simple way - you’ll usually need clear arrangements about whether employment ends with the seller and whether the buyer will offer new employment (and how entitlements, if any, will be recognised). If you’re buying and you plan to re-engage staff, having compliant agreements ready matters. This is where a proper Employment Contract can help you set expectations and reduce disputes from day one.

5. Data, Customer Lists, And Privacy

Customer databases and mailing lists can be valuable assets, but you need to handle them carefully. If personal information is being transferred, you should consider privacy obligations (including whether notices, consents, or updated privacy disclosures are required) and whether the buyer’s planned use aligns with what customers were told.

For many businesses, it’s also a practical time to refresh your Privacy Policy, especially if the new owner will change how customer data is used (for example, new marketing platforms, new loyalty programs, or a new online store).

Key Takeaways

• A Victorian contract of sale of business sets the rules for the entire transaction, and the LIV contract of sale of business is a commonly used starting template - but it still needs deal-specific drafting and review.
• Be clear from the start whether you’re doing an asset sale or a share sale, because your risks, warranties, and transfer steps can be very different.
• Always confirm exactly what is included in the sale (assets, stock, IP, goodwill, data, and handover support) and document it clearly in the contract.
• Due diligence is where buyers protect themselves - including checking leases, financials, contracts, and security interests like those recorded on the PPSR.
• Settlement runs smoother when you plan the handover early and use a structured completion process, rather than relying on last-minute emails.
• If you’re hiring or re-engaging staff after the purchase, have compliant employment documentation ready so you can operate confidently from day one.

Business sales can also involve tax and duty issues (including GST and stamp duty) depending on the structure and the assets being transferred, so it’s worth getting tax and accounting advice alongside legal advice.

If you’d like a consultation on a contract of sale of business in Victoria, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.