How To Sell Shares In An Australian Company

There are plenty of reasons you might be thinking about selling shares in your Australian company. Maybe an early investor wants an exit. Maybe you’re bringing in a new strategic partner. Or maybe you’re a founder who wants to tidy up the cap table before a capital raise.

Whatever the reason, a share sale isn’t just a “send an invoice and update a spreadsheet” kind of task. Selling shares changes who owns your company, who controls decision-making, and who benefits from future growth. If you don’t handle the legal steps properly, you can end up with disputes between shareholders, a messy company register, or unintended tax and governance issues.

This guide breaks down how share sales typically work for startups and small businesses in Australia, what documents you’ll usually need, and the practical checkpoints to help you keep the transaction clean and commercially sensible.

What Does “Selling Shares” Actually Mean In A Startup Or Small Business?

In a private Australian company (most startups and small businesses), shares represent ownership in the company. When you sell shares, you are usually transferring existing shares from one person/entity (the seller) to another (the buyer).

This is different from the company issuing new shares. In a new share issue, the company creates additional shares and sells them to an investor, which can dilute existing shareholders. In a share sale, the company doesn’t receive the purchase price (the seller does), and the total number of shares stays the same.

Common Reasons Small Businesses Sell Shares

• Founder exit or partial exit: A founder steps back, and another shareholder or new buyer takes over their stake.
• Early investor liquidity: An early investor wants to cash out (often before a larger fundraising round).
• New strategic shareholder: A partner buys in for expertise, distribution, or operational support.
• Family or succession planning: Shares are sold (or transferred) to family members to manage ownership over time.
• Cleaning up the cap table: Removing inactive shareholders or consolidating small holdings.

Share Sale Vs Asset Sale (Why It Matters)

If you’re selling your business, you might do it via a share sale (selling shares in the company that owns the business) or an asset sale (selling the business assets). The difference matters because:

• In a share sale, the buyer steps into ownership of the company, which means they also take the company “as is” (including its existing contracts, rights and obligations). The buyer will typically manage risk through due diligence, warranties/indemnities, and (sometimes) price adjustments or holdbacks.
• In an asset sale, the buyer can often choose which assets they’re buying and may be able to leave certain liabilities behind (depending on how the sale is structured and what the law requires to transfer).

For startups, selling shares can be simpler in concept, but it still needs careful documentation and due diligence because the buyer is effectively buying into the company’s legal and operational “whole story”.

Before You Sell Shares: The Practical Checks That Save You Headaches Later

Before you sign anything, it’s worth doing a few key checks. This is where a lot of share sale problems start - when people agree on the commercial deal but don’t check whether the company’s documents allow it.

1) Check The Company’s Rules (Constitution And Shareholder Arrangements)

Your company’s Company Constitution may contain rules about:

• how shares can be transferred
• whether directors must approve the transfer
• pre-emptive rights (existing shareholders get first right to buy)
• restrictions on transfers to competitors or third parties

If you also have a Shareholders Agreement, it often includes more detailed rules, including how price is determined, what approvals are needed, and what happens if shareholders disagree.

2) Confirm What’s Actually Being Sold

This sounds obvious, but it’s a common source of disputes. Confirm:

• how many shares are being sold
• what class of shares they are (ordinary shares, preference shares, etc.)
• whether any shares are subject to vesting, escrow, or restrictions
• whether there are options or convertible notes that will affect the cap table later

If your company has multiple classes of shares, the transfer can also affect voting rights and dividend rights - so it’s important the buyer understands what they’re getting.

3) Work Out The Price (And How It Will Be Paid)

Private company shares don’t trade on an open market, so pricing is usually negotiated. In practice, pricing might be based on:

• the latest investor round valuation
• a revenue multiple (more common in mature SMEs)
• an agreed valuation methodology (set out in a shareholder agreement)
• a discount to reflect minority holding or illiquidity

Also agree on the payment structure (lump sum, instalments, or vendor finance style arrangements) and what happens if the buyer defaults.

4) Check If Anyone Else Needs To Approve The Deal

Depending on your documents and the circumstances, you might need:

• director approval (board resolution)
• shareholder approval (ordinary or special resolution)
• third-party consent (for example, where finance documents restrict ownership changes)

If your company has outside investors, they may have veto rights over share transfers, especially if the buyer is unknown to them.

How Do You Sell Shares In An Australian Company? A Step-By-Step Process

While each company is different, most private company share transfers in Australia follow a similar workflow.

Step 1: Agree Heads Of Terms (Commercial Deal First)

Start by confirming the “headline” deal points in writing. This could be an email chain or a short term sheet covering:

• who is selling and who is buying
• number and class of shares
• price and payment terms
• completion date and conditions
• any restraints, handover arrangements, or ongoing obligations

This keeps everyone aligned before you spend time on formal legal documents.

Step 2: Due Diligence (Especially If The Buyer Is External)

If a shareholder is selling shares to someone outside the business, the buyer will often want to do due diligence on things like:

• financial performance and forecasts
• key contracts (customers, suppliers, leases)
• intellectual property ownership
• employment and contractor arrangements
• existing disputes or liabilities

This is also where founders sometimes realise their internal paperwork needs a tidy up (which is common, and fixable).

Step 3: Prepare The Share Sale Documents

For most small businesses and startups, the key document is a Share Sale Agreement. This sets out the legal deal in detail, including protections for both sides.

Depending on the circumstances, you may also need additional documents (for example, deeds of accession so the buyer becomes bound by the shareholders agreement).

Step 4: Sign And Complete (Including Correct Execution)

Completion is when the money and ownership change hands (or are treated as having changed hands). Make sure the execution mechanics are correct - particularly if a company is signing documents. In Australia, company execution is often done under section 127, and it’s worth understanding the signing rules set out in section 127 signing.

Step 5: Update Your Company Records

After completion, you’ll usually need to:

• update the share register (and ensure it matches reality)
• issue a new share certificate (if your company uses them)
• cancel or record the transfer of the seller’s share certificate (if applicable)
• store all approvals and signed documents in the company records

A lot of issues around share sales happen here - where the parties do the commercial deal, but the company never properly updates its records.

What Legal Documents Do You Usually Need When Selling Shares?

The right paperwork depends on your company, the buyer, and whether the sale is friendly (internal transfer) or more formal (third-party buyer). That said, there are a few documents that commonly come up when selling shares in Australian private companies.

Share Sale Agreement

This is typically the core legal document. It usually covers:

• the shares being sold and the purchase price
• how and when payment happens
• completion mechanics (what must happen on completion)
• warranties (promises) from the seller (and sometimes the company)
• limitations of liability (caps, time limits, exclusions)
• restraint and confidentiality clauses (where relevant)

Even if it’s a “friendly” sale (for example, between founders), documenting it properly can prevent misunderstandings later - especially if the company takes off and the shares become valuable.

Share Transfer Form

A share transfer is usually documented using a share transfer form and then recorded in the company’s share register. If you’re not sure what’s required or how it works in practice, share transfer forms are a good example of where the “admin” details matter, because errors can affect ownership records.

Board And Shareholder Resolutions

Depending on your constitution and any shareholders agreement, you may need written resolutions to approve the transfer. This is particularly relevant if:

• there are pre-emptive rights or drag/tag provisions
• directors must approve transfers before they are registered
• the company is also party to the transaction (for example, releasing someone from obligations)

Deed Of Accession / Deed Of Adherence

If you have a shareholders agreement, the buyer will often need to sign a deed to confirm they are bound by it going forward. Without this, you can end up with a new shareholder who technically isn’t subject to the same rules as everyone else.

Updates To Your Company Register And Cap Table

This isn’t a “contract” in the same way, but it’s still essential. Your company should keep accurate records of ownership. If you later want to raise capital, sell the business, or bring on lenders, inconsistent records can slow everything down.

Common Risks When Selling Shares (And How To Avoid Them)

Selling shares can be a straightforward transaction, but startups and small businesses often run into predictable issues. Here are some of the main ones we see, and what you can do early to reduce risk.

Unclear Pre-Emptive Rights Or Transfer Restrictions

If your constitution or shareholders agreement says existing shareholders must be offered the shares first, you need to follow that process. Skipping it can mean you’re in breach of your company documents or the deal gets delayed (for example, because the company refuses to register the transfer until the steps are followed).

Practical tip: check your documents early, and build timing into your deal to allow for notice periods and acceptance windows.

Disputes Over Value Or “What The Buyer Was Told”

In private company share sales, disagreements can arise if the buyer later says they were misled about the business. This is why warranties and disclosure processes matter - even for small transactions.

Practical tip: document what information the buyer reviewed, and don’t overpromise in writing (especially around future revenue or contracts “about to be signed”).

Founder Exits Without A Clean Handover

Where a founder sells shares and steps away, it’s common to also need:

• IP assignment confirmation (the company owns the product/brand)
• return of company property and access management
• confidentiality and non-disparagement protections

Practical tip: treat a founder share sale like both a commercial sale and a governance reset - because it usually is.

Forgetting The “Paperwork After The Deal”

It’s surprisingly easy to do the deal, take the payment, and forget to update the share register and company records. This can create long-term problems, including disputes about voting rights and entitlements.

If you need a practical overview of the process end-to-end, how to transfer shares is a useful way to sense-check the mechanics you should be following.

Selling Shares To Family Members (Extra Care Still Needed)

Transfers within families are common in small businesses, but they still need to follow your company’s rules, and you’ll usually still want documentation (even if money isn’t changing hands in the traditional way).

If your transaction involves family, transferring shares to family members is a scenario where clarity upfront can prevent difficult conversations later.

A Quick Note On Tax (CGT) And Duties

Selling shares can have tax consequences, and the right outcome depends on your specific circumstances.

• Capital gains tax (CGT): A share sale may trigger a capital gain (or loss) for the seller. Some sellers may be eligible for CGT discounts or small business CGT concessions, but eligibility depends on a range of factors.
• Stamp duty / transfer duty: In most cases, duty is not payable on transfers of ordinary shares, but there are exceptions in some States and Territories (for example, where the company is “land rich” or holds significant interests in land). Duty rules can be complex and jurisdiction-specific.

This article is general information only and isn’t tax advice - it’s best to speak to your accountant or tax adviser early so tax and duty issues don’t derail your timeline.

Key Takeaways

• Selling shares in a private Australian company is usually a transfer of existing ownership (not a new share issue), and it can affect control, voting, and future value.
• Before you sign, check your Company Constitution and any Shareholders Agreement for restrictions like pre-emptive rights and director approval requirements.
• Most share sales need a clear Share Sale Agreement, plus supporting documents like share transfer forms, approvals, and updated company registers.
• Common risks include pricing disputes, failing to follow transfer restrictions, messy records, and unclear expectations when a founder exits.
• Don’t forget tax (including CGT) and potential duty issues - get advice early so the transaction is structured properly.

If you’d like help with selling shares in your company or preparing the right documents for a smooth transfer, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.