What You Need To Know About Share And Unit Sales

Buying or selling ownership in an Australian business often happens through either a share sale (in a company) or a unit sale (in a unit trust). If you’re planning a transaction, understanding how these deals work, the legal documents you’ll need, and the pitfalls to avoid will make your process smoother and protect your interests.

In this guide, we’ll break down the essentials in plain English so you can approach a share or unit sale with confidence. We’ll cover how these deals differ, the key steps from term sheet to completion, and the contracts and approvals you typically need in Australia.

What Are Share And Unit Sales?

A share sale is where the buyer purchases shares in a company from the existing shareholder(s). The company itself stays the same-same ABN, assets, employees, contracts and liabilities-only the ownership changes hands.

A unit sale is similar, but the subject of the sale is “units” in a unit trust. Units represent a beneficiary’s interest in the trust, which in turn holds the business’ assets or the shares in an operating company. Unit trusts are commonly used in Australian small business structures for flexibility and potential tax planning.

In both cases, you’re transferring an ownership stake. But the legal mechanics, approvals and documents can differ based on the structure, the governing documents (like the constitution or trust deed), and any existing agreements between owners.

If your company has more than one class of shares (for example, ordinary versus preference), your rights and the sale mechanics might vary-so it’s worth understanding the different classes of shares that could be involved in your deal.

Share Sale vs Unit Sale: Which Suits Your Deal?

Choosing between selling shares, selling units, or going down another path (like an asset sale) depends on your objectives and the structure you already have. Each approach has pros and cons.

Share Sales (Company Shares)

• Continuity: The company keeps all assets, employees, contracts and licences. This can reduce disruption for customers and staff.
• Liabilities: The buyer takes on the company “as is,” including its historical liabilities. This is why due diligence and robust warranties are critical.
• Approvals: Company constitutions or shareholders agreements often include pre‑emptive rights, tag/drag provisions, or board approval requirements that can affect timing and process.

Unit Sales (Units In A Unit Trust)

• Trust Structure: The trust deed governs unit transfers and may include trustee discretions, consent requirements or pre-emptive rights for other unitholders.
• Underlying Assets: The trust typically owns the business assets or the shares of an operating company. Ownership of those assets doesn’t change-just the unit holder.
• Flexibility: Unit trusts can offer distribution flexibility, but that can add complexity to the sale process and tax outcomes (seek accounting advice for the tax piece).

What About An Asset Sale?

Sometimes the better choice is to buy or sell the business assets directly (plant and equipment, IP, contracts) rather than the shares or units. An asset deal may help ring‑fence liabilities but requires novating or re‑papering contracts, transferring employees and licences, and resetting supplier accounts. For a deeper comparison, see Share Sale vs Asset Sale.

Key Legal Steps In A Share Or Unit Sale

While every deal is unique, most share or unit sales in Australia follow a similar roadmap. Here’s a practical sequence you can adapt to your situation.

1) Agree Heads Of Terms (Non‑Binding)

Start with a term sheet or heads of agreement to record the headline commercial terms: price (and how it’s calculated), payment structure (cash, earn‑out, vendor finance), completion timing, any conditions precedent, and basic risk allocation. This document is usually non‑binding except for confidentiality, exclusivity and cost provisions.

2) Conduct Due Diligence

The buyer will typically review corporate, financial, legal and operational information. This may include the constitution or trust deed, cap table, material contracts, intellectual property, licences, employment arrangements, disputes and compliance. A targeted legal review helps identify risks and informs negotiations on warranties and price. Many buyers engage a lawyer for a tailored legal due diligence process.

3) Check Pre‑Emptive Rights And Consents

Before you lock in the deal, confirm whether the constitution, shareholders agreement or trust deed gives existing owners a first right to buy (pre‑emptive rights), or requires board/trustee or third‑party consent. Missing these steps can derail completion.

4) Negotiate The Sale Agreement

The main contract-usually called a Share Sale Agreement or Unit Sale Agreement-allocates risk and sets the rules for the transaction. You’ll negotiate price, conditions precedent, warranties and indemnities, limitations on liability (like caps and time limits), restraints (non‑compete and non‑solicit), completion deliverables and any post‑completion adjustments.

For company shares, this sits alongside corporate law and registry requirements. These mechanics are covered in more detail in our guide to the sale of shares in a private company.

5) Prepare Ancillary Documents

Depending on your deal, you may need to update or prepare related documents-director or trustee resolutions, deed polls, new services or employment agreements, novations, IP assignments, or a new shareholders or unitholders agreement if the buyer is joining as an owner post‑completion.

6) Satisfy Conditions Precedent

Common conditions include finance approval, key third‑party consents, regulatory approvals (where applicable), restructuring steps (for example, pre‑completion dividends or debt clean‑ups), or minimum working capital requirements. Track these with a CP checklist so nothing is missed.

7) Complete The Transfer And Update Registers

On completion, the buyer pays the price, and the seller delivers signed transfer forms and share/unit certificates. Company share deals also require updating the company’s register and lodging changes with ASIC (where required). For practical guidance on the process, see how to transfer shares and our ASIC transfer of shares compliance guide. Private deals are often settled as off‑market share transfers without an exchange‑listed broker.

8) Post‑Completion Handover

After completion, update bank mandates, ASIC records, IP ownership records (if relevant), software admin rights, and notify customers and suppliers if needed. If there’s an earn‑out or transition services, diarise milestones and reporting obligations.

Documents You’ll Usually Need

Every transaction is different, but these are the documents we regularly see in Australian share and unit sales. Getting them tailored to your deal and structure will reduce risk and save you time.

• Share Sale Agreement: The principal contract that sets the price and allocates risk, including warranties, indemnities, restraints and completion mechanics.
• Unit Sale Agreement: Equivalent to a Share Sale Agreement but for units in a unit trust, referencing the trust deed and trustee consents.
• Shareholders Agreement: If the buyer becomes a co‑owner rather than acquiring 100%, you’ll usually want a fresh or updated agreement covering decision‑making, rights and exits.
• Unitholders Agreement: The trust‑structure counterpart setting out how unitholders govern the business, distributions and transfers.
• Company Constitution: Governs how shares can be issued or transferred, board powers and meetings. Check it early for pre‑emptive rights or consent requirements.
• Trust Deed And Any Variations: For unit sales, the trust deed rules unit transfers, trustee powers, distributions and consent mechanics.
• Disclosure Letter: Qualifies the seller’s warranties by disclosing known issues, which helps avoid “breach of warranty” disputes later.
• Restraint Deed/Clauses: Prevents the seller from competing or poaching staff/customers for a period and within defined geography.
• Employment And Contractor Agreements: New or updated Employment Contract or contractor terms are often prepared for key staff at or after completion.
• IP Assignments And Licences: Ensures brand names, content, software and domains sit where the parties expect post‑deal.
• Finance/Vendor Finance Documents: If part of the price is deferred or financed, include repayment terms, security and default remedies.

Depending on your sector, you may also need regulator notifications, landlord consents, franchise approvals, or updated supplier agreements. A comprehensive checklist at the outset helps keep everything aligned with your completion date.

Common Issues To Watch (And How To Manage Them)

Most hiccups in share and unit sales are avoidable with early checks and clear contracts. Here are the big ones we see-and what to do about them.

Pre‑Emptive Rights And Transfer Restrictions

Constitutions, shareholders agreements and trust deeds often require you to offer the shares or units to existing owners first at the same price (or a price set by a valuer), or to obtain board/trustee consents. Build this into your timeline so it doesn’t delay completion. Make sure the process you follow strictly matches the document wording.

Third‑Party Consents

Key contracts sometimes include “change of control” clauses that require consent if more than a specified percentage of shares changes hands. This can appear in customer, supplier, landlord or finance agreements. Identify these early and speak with stakeholders well before completion.

Retention, Earn‑Outs And Price Adjustments

Where there’s uncertainty (for example, pipeline revenue or near‑term risks), parties often agree to hold back part of the price or tie it to performance. Define the KPIs precisely, set clear time frames and dispute mechanisms, and decide who controls the business during the earn‑out period.

Warranties, Indemnities And Liability Caps

Buyers look for broad warranties; sellers want tight wording and clear limits. A common compromise is to include knowledge qualifiers, time limits for claims, de minimis thresholds, baskets and overall caps (sometimes linked to the price). Use a detailed disclosure letter so known issues are carved out.

Employee Transfers And Incentives

In share sales, employees remain employed by the same company, but you’ll often update titles, reporting lines and incentives. In unit sales, the practical effect is similar if the operating company doesn’t change. If there are employee options or performance rights, convert or cancel them according to plan rules and the sale agreement.

Post‑Deal Governance

If the buyer is acquiring a partial stake, refresh governance documents. New co‑owners usually revisit board composition, reserved matters, dividend policy and exit terms. Updating or replacing the Shareholders Agreement or Unitholders Agreement at completion avoids misalignment later.

Company Secretarial And ASIC Updates

Make sure company registers, share certificates and ASIC records are updated promptly. If you’ve changed directors or issued/transfered shares, ensure your filings reflect the transaction accurately. For process detail and timing, our ASIC transfer guide and share transfer guide can help you plan lodgements.

Tax Planning And Restructures

Even though this is a legal guide, tax treatment can materially change your net outcome. It’s common to see pre‑completion dividends, debt clean‑ups or minor restructures to get the business “deal‑ready.” Coordinate your legal steps with accounting advice so the transaction documents reflect the intended tax position.

Practical Tips To Streamline Your Transaction

• Confirm your structure and governing documents early. Know whether you’re selling shares or units, and review the constitution or trust deed on day one.
• Build your data room. A clean, well‑organised data room makes due diligence faster and gives buyers confidence.
• Map your critical path. List out consents, pre‑emptive processes, finance approvals and CPs, and set realistic timeframes.
• Use a clear completion checklist. Align deliverables (transfers, certificates, resolutions, payments) so settlement runs smoothly.
• Document transition support. If the seller will help post‑completion, define scope, time commitment and fees in a short services schedule.
• Keep communication open. Early engagement with key customers, staff and suppliers helps protect value through the change of ownership.

If you’re buying or selling in a company context, it’s also worth skimming our overview of how share sales work so you can spot issues early and set up the right process.

Key Takeaways

• A share sale transfers ownership in a company; a unit sale transfers ownership in a unit trust-both change who controls the business without moving its assets.
• Your constitution, shareholders agreement or trust deed often controls how shares or units can be sold, including pre‑emptive rights and consent steps-check these first.
• Most deals follow a clear sequence: term sheet, due diligence, consents, negotiating the sale agreement, satisfying conditions and completing the transfer.
• Core documents include a Share Sale Agreement or Unit Sale Agreement, a Disclosure Letter, updated governance documents and any consents or novations required.
• Be proactive about risks-use precise warranties and liability caps, plan for consents and change‑of‑control issues, and keep ASIC and company records up to date.
• If you’re weighing structures, consider whether an asset sale is more suitable; see the comparison of a share sale vs asset sale to decide what aligns with your goals.

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