How To Sell Shares In An Australian Company

Selling shares in your company can unlock capital, bring in a strategic partner, or help a founder partially exit while keeping the business moving forward.

It’s also a legal process with moving parts - from choosing the right structure for the deal to getting company approvals and lodging changes correctly.

In this guide, we’ll walk you through how to sell shares in a private Australian company, the documents you’ll need, common pitfalls to avoid and practical steps to make the process smooth.

When Would A Small Business Sell Shares?

There are several reasons a private company might sell or transfer shares:

• Raise growth capital without taking on bank debt.
• Bring in a co-founder, advisor or strategic investor.
• Enable a partial exit for a founder or early shareholder.
• Implement an employee equity plan (e.g. options converting into shares).
• Restructure ownership among existing shareholders.

It’s also important to understand whether your situation calls for a share sale vs asset sale. A share sale transfers ownership of the company itself (including all assets and liabilities) to the buyer. An asset sale transfers specific assets out of the company. Each pathway has different legal and tax implications, so it’s worth getting advice before you commit.

How Do You Sell Shares? Step-By-Step

The process will look slightly different depending on whether you’re issuing new shares from the company or transferring existing shares between sellers and buyers. Below is a practical roadmap you can adapt to your situation.

1) Map The Transaction: Issue Or Transfer?

Decide what you’re actually selling.

• New issue (subscription): The company issues new shares to the investor in exchange for funds. This changes the total number of shares on issue and dilutes existing holders.
• Transfer of existing shares: Current shareholder(s) transfer a portion of their holdings to the buyer. Total shares on issue stay the same.

If you’re new to these concepts, start with a high-level overview of the sale of shares in a private company so you understand the typical steps and approvals involved.

2) Check Your Constitution And Shareholders Agreement

Before you shake hands on a deal, review the company’s constitution and any Shareholders Agreement. These documents often include:

• Pre-emptive rights (existing shareholders get first right to buy shares before outsiders).
• Consent requirements (board and/or shareholder approvals for issues or transfers).
• Drag/tag-along rights (if a majority sells, others may be “dragged” to sell; minority can “tag” to join).
• Share class rules (e.g. whether new shares can carry different rights).

Understanding these requirements up front will save you from renegotiations later.

3) Align On Valuation And Deal Terms

Agree on the price and key terms early, even if it’s just a short-form term sheet or heads of agreement. This should cover valuation, number of shares, investor rights, warranties, conditions precedent and completion mechanics. We cover valuation approaches further below, and Sprintlaw’s guide to valuing shares is a helpful starting point.

4) Prepare The Right Transaction Documents

The documents you’ll need depend on the deal structure:

• For new issues: a share subscription agreement (sometimes included within a broader investment agreement) and any board/shareholder resolutions required under your constitution.
• For transfers: a Share Sale Agreement, transfer forms and resolutions to approve the transfer.

If you’re unsure which path fits, talk to a lawyer early - it’s quicker and more cost-effective to draft the right contract from the outset than to retrofit later.

5) Tidy Up Company Approvals And Registers

You’ll usually need to pass board and/or shareholder resolutions to approve the transaction. After completion:

• Update the share register with the new holding details.
• Issue new share certificates (or cancel and reissue, for transfers).
• Record any changes to directors or company details that flow from the deal.

For transfers, our step-by-step guide on how to transfer shares explains the typical forms, signatures and lodgements involved.

6) Notify ASIC And Handle Lodgements

Private companies need to keep ASIC (the corporate regulator) up to date. If shareholdings change, companies typically lodge the relevant changes shortly after completion. Make sure you’re following ASIC’s current process for notifying share structure changes - our overview of ASIC transfer of shares in private companies highlights the compliance points to watch. If you’re doing a transfer privately between parties, it’s commonly called an “off-market” transfer.

7) Complete And Post-Completion Checks

On completion day, funds are paid, signed documents are exchanged and share registry updates occur. Common post-completion tasks include:

• Confirming the buyer has been entered on the register as the legal owner of the shares.
• Delivering share certificates and any deeds of accession if the buyer is joining a shareholders agreement.
• Updating any cap table tools and notifying stakeholders where appropriate.

What Legal Documents Will You Need?

Every deal is different, but most share sales or issues will include some combination of the following documents.

• Share Sale Agreement: Sets the price, number of shares, warranties, indemnities, conditions and completion steps for a transfer between a seller and buyer. A well-drafted Share Sale Agreement helps allocate risks clearly and prevent disputes.
• Share Subscription Agreement: Used when the company issues new shares to an investor (instead of a transfer). It covers subscription price, conditions precedent and investor rights.
• Shareholders Agreement: Governs how shareholders work together (decision-making, exits, pre-emptive rights, drag/tag, dispute resolution). If you don’t have one, consider putting a Shareholders Agreement in place alongside the transaction.
• Company Constitution: Your constitution sets the rules for issuing shares, transfers, meetings, and approvals. Check it for pre-emptive rights and consent thresholds before finalising terms. If needed, you can update or adopt a new Company Constitution.
• Deed of Accession: If the buyer is joining an existing shareholders agreement, a deed of accession binds them to those terms.
• Board/Shareholder Resolutions: Formal approvals to issue or transfer shares and to update the share register.
• Share Certificates: Evidence of ownership for the new holder. Ensure they match your share register entries.
• Disclosure Letter: If the seller is giving warranties, a disclosure letter lists exceptions, helping reduce warranty risk.

Your exact paperwork will depend on the deal structure, the number of parties and your existing governance documents. Getting the suite right from day one saves time, avoids rework and makes completion smoother.

Compliance, Taxes And Approvals To Consider

Beyond the contract, there are several legal and tax considerations to factor into your timeline and negotiations.

Company Law And Investor Limits

Private companies can’t make public offers, and there are rules about how you can raise funds without a full prospectus. If you’re issuing new shares to investors, you’ll want to understand the small-scale offering exemption under section 708 of the Corporations Act 2001 (Cth) and who qualifies as sophisticated investors. These issues can influence your documentation, disclosures and investor on-boarding process.

Pre-Emptive Rights And Consents

Many constitutions and shareholders agreements require the company to offer shares to existing holders first (pre-emptive rights) or get consent for a transfer. Build these steps into your process and timeline.

ASIC Notifications And Record-Keeping

Keep your company registers current and lodge required changes with ASIC promptly. Accurate records (register of members, resolutions, certificates) are critical for future audits, exits and due diligence.

Stamp Duty And Tax

Some states and territories can charge duty on share transfers (often for certain landholder or significant value transactions). There are also capital gains tax (CGT) consequences for sellers, and franking/imputation considerations for dividends post-deal. It’s wise to involve your accountant early to model outcomes and explore any small business CGT concessions that may apply.

Employee Equity And ESS Rules

If your sale is linked to employee equity (e.g. options converting to shares), make sure your plan aligns with current employee share scheme rules. Confirm vesting, exercise price and any disposal restrictions before signing the deal.

Pricing And Valuation: How Do You Decide What Shares Are Worth?

Valuation is part art, part science. Most private company deals use one or a mix of these approaches:

• Comparable multiples: Apply a revenue or EBITDA multiple based on similar companies, adjusted for size and growth.
• Discounted cash flow (DCF): Project future cash flows and discount them to today’s value.
• Asset-based: Especially for asset-heavy companies, value net assets on a fair market basis.
• Deal benchmarking: Consider recent offers, prior rounds and investor appetite.

Whatever method you choose, anchor it to the company’s current stage and risk. Early-stage businesses often prioritise simple, agreed pre-money and post-money valuations backed by milestone-based terms. If you’d like a deeper primer, our guide to valuing shares in a private company explains the common approaches in plain English.

Common Pitfalls (And How To Avoid Them)

Here are traps we regularly see in small business share deals - and how to sidestep them.

• Skipping the constitution/shareholder review: You agree terms with a buyer, only to discover pre-emptive rights or consent thresholds block the deal. Always check your governance documents first.
• Using the wrong document: Transfers and issues use different contracts and processes. If it’s a transfer, start with a Share Sale Agreement; if it’s a new issue, you’ll need a subscription/investment agreement and the right approvals.
• Overlooking share classes: Rights vary across classes (voting, dividends, liquidation preference). If you’re creating new classes for investors, make sure they’re properly authorised under your constitution and consistent with your Shareholders Agreement.
• Unclear completion mechanics: Who transfers first - cash or certificates? What if a condition isn’t met? Clear conditions precedent, completion steps and escrow arrangements prevent last-minute stalls.
• Weak warranties or disclosures: Sellers usually give warranties about the company and the shares. A thorough disclosure letter aligns expectations and reduces warranty risk.
• Admin gaps post-completion: Not updating the share register, forgetting certificates, or missing ASIC lodgements can cause headaches. Use a checklist and assign responsibility for each task.
• Regulatory blind spots: Issuing to many investors without checking s708, or offering to the public, can trigger prospectus obligations. Stay within the private placement exemptions.

FAQs: Practical Questions Business Owners Ask

What’s The Difference Between A Share Transfer And An Issue?

A transfer moves existing shares from a seller to a buyer; an issue creates new shares, which the company sells directly to the investor. Transfers use transfer forms and a sale agreement; issues use subscription documents and dilute existing holders.

Do I Need A Lawyer To Sell Shares?

You can technically complete a simple transfer using standard forms, but most deals benefit from tailored documentation, checks against your constitution and shareholders agreement, and clear completion mechanics. Even for a straightforward transaction, it’s smart to review how to transfer shares and ASIC’s expectations for private company changes, including ASIC transfer of shares compliance.

Can I Sell A Small Percentage Now And More Later?

Yes. You can stage the sale through multiple tranches. If so, your primary agreement should outline timing, price adjustments, performance milestones (if any) and what happens if later tranches don’t complete.

Do I Need To Tell My Customers Or Suppliers?

Usually, a share sale doesn’t change contracts (the company stays the same). However, some contracts include change-of-control clauses. If a sale results in a change of control, you may need to notify or obtain consent from key counterparties.

Key Takeaways

• Decide early whether your deal is a share transfer or a new issue, and structure your documents accordingly.
• Check your constitution and any Shareholders Agreement for pre-emptive rights, consent requirements and share class rules.
• Agree on valuation and headline terms up front, then document the deal with a suitable Share Sale Agreement or subscription agreement.
• Keep your company records clean: update the share register, issue certificates and follow ASIC’s process for notifying private company changes (including any ASIC transfer of shares steps).
• Build tax, duty and regulatory checks into your timeline to avoid surprises down the track.
• For pricing, anchor your discussions to practical methods - and use a simple term sheet to align expectations before drafting long-form documents.

If you’d like a consultation on selling shares in your company, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.