Contract Sales Explained: Australian Guide for Share & Business Transactions

Buying or selling a business is a big step - and the contract that records your deal is what makes it legally enforceable, protects your rights and helps the handover run smoothly.

Whether you’re selling company shares or transferring the business’ assets, a well-drafted contract of sale is essential. It sets the price and payment terms, allocates risk (through warranties and indemnities), and maps out exactly what needs to happen before, at and after completion.

In this guide, we’ll walk through the key differences between a share sale and an asset (business) sale, the usual process from heads of agreement to completion, and the clauses you’ll want to see in your sale agreement. We’ll also cover practical issues like transferring employees, leases and intellectual property so you’re set up for a clean handover.

What Is a Contract of Sale (and Why It Matters)?

A contract of sale is the legal agreement that records the terms of your transaction. In a business context, it’s typically either:

• a Share Sale Agreement (you’re selling or buying the shares in a company), or
• a Business/Asset Sale Agreement (you’re selling or buying the business assets such as goodwill, IP, stock, plant and equipment, and sometimes key contracts).

Both versions do similar jobs - they define what’s being sold, the price and how it’s paid, any conditions that must be met before completion, and the seller’s promises about the business (warranties). But each structure has different legal and tax consequences, and the agreement must reflect those differences precisely.

If you’re purchasing or selling, it’s worth having a tailored Business Sale Agreement or Share Sale Agreement prepared or reviewed by a lawyer. The wording of a single clause can shift significant risk between the parties.

Share Sale vs Business (Asset) Sale: Which Structure Fits Your Deal?

One of your earliest decisions is whether the buyer will acquire the company (by buying its shares) or just the business assets. Each path has pros and cons.

How a Share Sale Works

In a share sale, the buyer acquires the shares in the existing company. The company continues to own the business, assets, employees and contracts - they don’t change hands. The buyer essentially steps into the shoes of the existing shareholders.

This can be simpler from an operational perspective (for example, there’s often no need to re-assign every contract), but the buyer takes on the company’s history, including any undisclosed liabilities. That’s why robust warranties, indemnities and due diligence are crucial in a share sale.

For a step-by-step overview, it’s helpful to read about the sale of shares in a private company and how these transactions are typically documented.

How an Asset (Business) Sale Works

In an asset sale, the buyer purchases specific assets (and sometimes assumes specific liabilities) from the seller, rather than buying the company itself. This often includes goodwill, brand assets, domain names, customer lists, stock and equipment.

Contracts with landlords, suppliers and customers usually need to be assigned or novated to the buyer. Buyers often prefer asset deals to “cherry pick” what they want and leave unwanted liabilities behind, but it can be more administratively heavy because you must transfer each asset individually.

Choosing the Right Path

There’s no one-size-fits-all answer. Consider tax, liability, third‑party consents, and speed of transfer. If you’re weighing both options, this comparison of share sale vs asset sale sets out the practical and legal differences to keep in mind.

How the Process Usually Works (Step‑By‑Step)

Deals vary, but most transactions follow a similar roadmap. Here’s the usual flow from handshake to handover.

1) Heads of Agreement (Term Sheet)

Start by documenting the key commercial terms (price, structure, inclusions, timeline, any earn‑out) in a short‑form document. This helps align expectations before lawyers draft the binding agreement.

A clear, signed Heads of Agreement can save time and cost by locking down the deal headlines early, while leaving space for due diligence and legal drafting.

2) Legal and Financial Due Diligence

The buyer investigates the business to confirm it’s as represented - reviewing financials, key contracts, employees, intellectual property, licences and any disputes. Red flags become negotiation points or conditions to fix before completion.

Many buyers engage lawyers to run a targeted review so nothing material is missed. A structured approach like Sprintlaw’s Legal Due Diligence Package helps you prioritise risks and keep momentum.

3) Drafting and Negotiating the Sale Agreement

Once the parties are aligned on the key terms and diligence is underway, your lawyers draft the sale agreement. Both sides negotiate warranty scope, liability caps, restraints, completion deliverables, and the mechanics of price adjustments or earn‑outs.

Tailoring the agreement to your deal is key - a boilerplate document will rarely allocate risk the way you intend.

4) Satisfying Conditions Precedent

Most deals include conditions that must be satisfied before completion. Common examples include landlord consent to a lease assignment, bank consent to release a security interest, key customer or supplier consents, and regulatory approvals. The contract will set deadlines and who is responsible for each.

5) Completion (Settlement)

On completion, money and documents change hands. The seller delivers the signed transfer documents, IP assignments, releases and consents; the buyer pays the purchase price (less any agreed holdback, retention or escrow). The contract often includes a detailed completion agenda so everyone knows what to bring to the table.

6) Post‑Completion Handover

After settlement, practical transition items kick in - notifying customers and suppliers, changing passwords and system access, and completing any training or assistance obligations. In a share deal, the company updates its internal share register and issues new share certificates. Proprietary companies generally do not “file share transfers with ASIC” at completion. Instead, ASIC is notified if the company’s share structure changes, and member changes are reflected in the annual company review. If you’re unsure about the paperwork, this ASIC transfer of shares overview is a helpful reference.

Essential Clauses Every Sale Agreement Should Cover

Solid drafting protects value and reduces disputes. Here are the key areas your contract should clearly address.

What Exactly Is Being Sold

• Share deals: the number and class of shares, who is selling which parcel, and any pre‑completion steps (like reclassifications or buy‑backs).
• Asset deals: a schedule listing the assets included and excluded (for example, goodwill, domain names, stock, plant and equipment), plus which liabilities (if any) the buyer is assuming.

Purchase Price and How It’s Paid

• Deposit, balance and timing.
• Adjustments for stock on hand, working capital or debt‑like items.
• Any earn‑out (performance‑based payments) and how it’s calculated and verified.
• Security for deferred payments (retentions, escrow, personal guarantees or PPSR registrations).

GST and Going Concern

Your agreement should state whether GST applies. If the sale qualifies as the “supply of a going concern” (and the parties are registered and the conditions are met), it may be GST‑free - but this must be handled explicitly in the contract and supported by the facts. It’s wise to get tax advice alongside your legal work here.

Conditions Precedent

Spell out the approvals and consents required before completion and who will pursue them. In asset deals, this often includes landlord consent to assign the lease and key customer or supplier consents to transfer contracts.

Warranties and Indemnities

Warranties are the seller’s statements about the business (for example, financial statements accuracy, ownership of assets, no disputes pending). Indemnities allocate responsibility for specific risks (such as pre‑completion tax liabilities).

Expect a negotiated balance: a buyer wants broad warranties and meaningful recourse; a seller wants fair time limits, caps and exclusions. The agreement should set claims processes, thresholds (de minimis and baskets) and survival periods.

Restraints and Non‑Solicitation

Buyers usually require a restraint to stop the seller from competing or poaching staff and customers for a period after the sale. The scope, geography and duration must be reasonable to be enforceable in Australia.

Employees and Entitlements

Who will the buyer employ? How will leave balances and other entitlements be handled? In asset sales, the contract usually sets out whether accrued entitlements transfer (with a purchase price adjustment) and how offers and start dates are managed.

Leases and Premises

If the business operates from leased premises, the contract should set out assignment or a new lease, any landlord conditions, and responsibility for costs. For assignments, the parties typically sign a Deed of Assignment of Lease at completion.

Key Contracts: Assignment or Novation

Some contracts can be assigned; others require the customer or supplier to consent to a novation. The agreement should list which contracts transfer and in what manner, and make completion conditional on critical consents. Where required, plan for a smooth contract assignment or novation process well ahead of settlement.

PPSR Releases and Clear Title

If assets are subject to registered security interests, the seller must arrange releases so the buyer receives clear title. It’s common for buyers to search and for sellers to obtain discharge letters and provide PPSR release numbers. If you’re new to this, here’s a primer on what the PPSR is and why it matters.

Completion Mechanics and Deliverables

The contract should include a clear completion agenda and document checklist - for instance, signed transfers, IP assignments, share certificates, resignation letters (for directors in a share sale), and equipment handover. Having a practical list keeps settlement efficient and reduces last‑minute surprises.

Transferring People, Premises and IP: Getting the Details Right

The devil is in the detail. These are the elements that often drive the real‑world success of the handover.

Employees

In an asset sale, employees do not automatically transfer - the buyer usually issues new employment offers. Decide whether accrued leave entitlements will be adopted by the buyer (with an agreed adjustment) or paid out by the seller.

If new offers are being made, ensure each employee signs an appropriate Employment Contract and that workplace policies are updated to reflect the new employer’s processes.

In a share sale, the employer doesn’t change - the company continues as the same legal entity - but it’s still important to review employment contracts, policies and any pending claims.

Premises

Engage with landlords early. They may require financial information, guarantees or a deed in their standard form. Build in time for this and make lease transfer a condition precedent where critical to the business.

Intellectual Property and Data

List all IP being transferred - trade marks, logos, domain names, social media handles, copyright materials, software code and licences. Get assignments signed and update registries (for example, domain registrar or app store accounts). For customer databases, ensure collection and transfer comply with privacy laws and the terms customers agreed to; if the buyer will operate a website, they will almost certainly need a tailored Privacy Policy.

Key Contracts

Identify material contracts early, check change‑of‑control or assignment clauses, and speak with counterparties ahead of time. For software, payments, distribution or reseller agreements, some counterparties may require a fresh agreement or charge a fee for consent. Plan for this in your timeline and budget.

Handover and Transition Support

Many deals include a short assistance period where the seller helps with introductions, training and knowledge transfer. Document the scope, hours and whether the seller is paid separately for this support.

Deal Structures, Taxes and Risk: Practical Considerations

Beyond the core terms, you’ll often negotiate how and when money changes hands, what happens with tax and how to keep both parties protected.

Earn‑Outs

An earn‑out ties part of the price to future performance (like revenue or EBITDA). To avoid disputes, define precisely how the metric is calculated, who prepares it, the accounting policies to use and the buyer’s obligations not to unreasonably depress performance. Consider audit rights and a dispute resolution mechanism for earn‑out calculations.

Vendor Finance

Sometimes a buyer pays part of the price over time. The seller may require interest, security and default remedies. If you’re considering this structure, align the main agreement with a robust Vendor Finance Agreement so the seller’s position is properly protected.

Adjustments, Stocktakes and Working Capital

Asset deals often include a stocktake near completion and a price adjustment based on actual stock on hand. Some larger transactions also adjust for a target level of working capital. The contract should set out the method, timeframe and any independent review process if there’s a disagreement.

Regulatory and Tax

Consider GST treatments (including going concern), stamp duty (which varies by state and asset type), payroll tax groupings and any industry‑specific licences. While your lawyer will draft the contract to align with the intended treatment, your accountant should provide tailored tax advice alongside the legal work.

Company Approvals and Corporate Housekeeping (Share Deals)

In a share sale, plan for company secretary tasks like updating the share register, issuing new share certificates, recording director changes and preparing board minutes. ASIC filings are generally required if the company’s share structure changes; changes in shareholders are typically captured via the annual review rather than a separate transfer filing for proprietary companies. If you need a refresher on the sequence, revisit the private company share sale steps.

Project Management and Checklists

Successful deals run on clear timelines, responsibilities and document lists. Your lawyers can coordinate stakeholders and keep conditions, consents and deliverables on track so settlement isn’t delayed. A clear completion agenda within your sale contract works wonders on the day.

Founders and Future Governance

If co‑founders are staying on post‑sale (for example, where the buyer acquires a majority but not 100%), consider whether your governance documents are up to date. Aligning your Shareholders Agreement and any Company Constitution updates with the new ownership can prevent headaches later.

Key Takeaways

• Your contract of sale is the engine room of the transaction - it defines the deal, allocates risk and maps the path to completion.
• Decide early whether you’re pursuing a share sale or an asset sale; each has different legal, tax and operational implications.
• Follow a clear process: heads of agreement, due diligence, a well‑drafted sale agreement, conditions precedent and a structured completion.
• Lock in essential clauses covering price and adjustments, warranties and indemnities, restraints, employees, leases, key contracts and PPSR releases.
• Plan the practical handover - transferring staff, premises and IP requires consents, assignments and a realistic timeline.
• Consider earn‑outs, vendor finance and GST/going concern treatment carefully, and document the mechanics to avoid disputes.
• In share deals, update internal company records correctly and understand when ASIC filings are needed (generally for share structure changes), rather than assuming transfers are filed at completion.
• Getting legal support early helps protect value, keep the timetable on track and ensure your agreement reflects the deal you intended.

If you’d like a consultation on your share or business sale, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.