Buying a business is exciting - you’re stepping into an operation with customers, systems and revenue from day one.
The key decision early on? Whether to buy the company itself (a share sale) or just the business assets you want (an asset sale).
Both paths can work well in Australia, but they come with very different legal, tax and risk implications. In this guide, we’ll walk you through the differences, when each option tends to be the better fit, and the steps and documents that help you complete the deal with confidence.
What’s The Difference Between A Share Sale And An Asset Sale?
At a high level, the distinction is simple - but the consequences are not.
Share Sale (Buying The Company)
- You purchase shares from the existing owners. The company entity stays the same, and it continues to own everything it owned before the sale.
- Customers, supplier contracts, leases, employees, licences and permits usually remain in place because the legal entity doesn’t change.
- However, you also inherit the company’s liabilities (known and unknown), subject to any protections in the sale agreement.
Asset Sale (Buying The Business Assets)
- You buy selected assets from the seller (for example, IP, equipment, stock, goodwill, and sometimes the lease and contracts).
- The buyer usually operates via its own entity after completion, and only the assets/rights listed in the sale agreement transfer over.
- Liabilities generally stay with the seller, unless you expressly agree to assume them - but you may need to transfer or re‑paper key contracts and approvals.
For a plain-English overview of these differences, it’s worth reading this guide that compares a Share Sale vs Asset Sale in more detail.
Which Option Is Better When You’re Buying A Business?
There’s no one-size-fits-all answer. The “best” structure depends on the risk profile of the target, your commercial goals and the practicalities of transferring what you need to run the business from day one.
When A Share Sale Often Makes Sense
- You need continuity and minimal disruption. Customer contracts, licences, distribution arrangements and supplier terms often continue seamlessly because the legal entity doesn’t change.
- The brand’s value is tied to the company’s history or credentials (for example, regulatory licences or long-standing approvals that are hard to transfer).
- The seller’s business is contract-heavy and consent requirements for assignment would be time-consuming or risky to obtain.
When An Asset Sale Is Often Preferable
- You want to pick and choose what you take on - assets, IP, key contracts and staff - while leaving behind historic liabilities.
- The target has potential legacy risks (disputes, compliance issues, tax exposures) that are difficult to price or diligence fully.
- You’re consolidating assets into an existing group structure or a special purpose vehicle and don’t need the original company.
There can also be tax, duty and accounting considerations for both sides. While we focus on the legal angles below, it’s wise to speak with your accountant together with your lawyer so the structure works across the board.
Key Legal Issues To Check In Any Business Purchase
Whether you’re buying shares or assets, thorough due diligence and careful drafting are essential. Here are the areas buyers usually prioritise.
1) Contracts That Keep The Business Running
Look closely at customer agreements, supplier and distribution contracts, software licences, and finance documents.
- In a share sale, watch for “change of control” clauses. Some contracts allow the counterparty to terminate or renegotiate if the company’s ownership changes.
- In an asset sale, most contracts won’t move across automatically. You’ll need novations or assignments, and sometimes customer or supplier consent. Understanding the rules around the assignment of contracts helps you plan the timeline.
2) Premises Leases And Property
If premises are critical, confirm the current lease terms, options to renew, outgoings and any arrears or disputes.
- In a share sale, the lease remains with the same tenant (the company), but check for any change of control provisions and landlord consent requirements.
- In an asset sale, you’ll need a lease assignment or a new lease with the landlord. A tailored Deed of Assignment of Lease is typically used to transfer the tenant’s rights and obligations.
3) Intellectual Property And Brand Ownership
Verify who owns the trade marks, domain names, social accounts, product designs, software code and other IP - and whether registrations are in place.
- In a share sale, the company should continue to own all IP, but confirm registrations, chain of title and any licences granted out.
- In an asset sale, be clear on what IP is included and ensure the transfer paperwork (for example, trade mark assignments and an IP Assignment) is signed at completion.
4) Employees, Entitlements And HR Compliance
Understand headcount, roles, pay rates, accrued entitlements and any disputes or claims.
- In a share sale, employees remain employed by the company on their existing terms (check awards, policies and any enterprise agreements).
- In an asset sale, you’ll choose which employees to offer roles to. Work through how entitlements are treated, and ensure compliant employment contracts are issued by your new entity.
5) Liabilities, Disputes And Compliance
Review all liabilities (bank and ATO debts, refunds/credit notes, warranties, long-term commitments), regulatory licences, insurance and any open disputes. In a share sale you inherit these at the company level, so you’ll want robust warranties, indemnities and limits of liability in the contract.
6) Privacy And Data
Consider how customer and user data will be lawfully transferred and used under the Privacy Act 1988 (Cth). Make sure the seller’s privacy practices align with your standards, so there’s no gap between what customers agreed to and how you plan to operate post-completion.
Step-By-Step: How The Process Usually Works
Every deal is different, but most Australian SME acquisitions follow a similar high-level path.
Step 1: Initial Discussions And Heads Of Terms
Align on the deal structure (share or asset sale), price, what’s included, proposed adjustments, and any conditions (such as finance or landlord consent). You can record this commercially in a short Term Sheet to frame the process and reduce misunderstandings.
Step 2: Due Diligence
Undertake legal, financial and operational due diligence to test the assumptions behind the price and structure. A targeted scope for Legal Due Diligence typically covers contracts, IP, employment, leases, licences, litigation, privacy, compliance and corporate records.
Step 3: Drafting And Negotiation
Agree the right agreement for the structure:
- For a share transaction, you’ll negotiate a Share Sale Agreement setting out price, completion mechanics, warranties and indemnities, restraints and post-completion obligations.
- For an asset transaction, you’ll use a Business Sale Agreement describing the assets included, assumed liabilities, employee transfer, tax and apportionments, and handover details.
Ancillary documents are prepared in parallel - assignments/novations of key contracts, lease transfer or new lease, IP assignments, releases, and any transitional services arrangements.
Step 4: Conditions And Consents
Work through landlord consent, customer and supplier approvals, finance consents, regulatory licences, and (in share deals) any change-of-control notifications. Planning the order and timing here can make or break your completion date.
Step 5: Completion And Handover
On completion, the parties exchange signed documents, update corporate records, transfer assets/registers, and settle the price (after agreed adjustments). A clear completion checklist helps keep the handover smooth - including access to premises, systems and data, and practical introductions to staff and key counterparties.
Step 6: Post-Completion Actions
Follow through with any post-completion filings, ASIC updates (for share deals), PPSR registrations, trade mark assignments, bank mandates, and communications to customers, suppliers and staff.
Contracts And Documents You’ll Likely Need
The specific bundle will depend on your deal, but most acquisitions require some or all of the following.
- Sale Agreement: A tailored Share Sale Agreement or Business Sale Agreement is the backbone of the deal, capturing price, risk allocation and the practical handover.
- Assignments/Novations: Documents to transfer or replace key supplier, customer and service contracts. These sit alongside your strategy for contracts with consent or change-of-control clauses.
- Lease Transfer: If premises are included in an asset sale, you’ll usually need a Deed of Assignment of Lease (or a new lease) with landlord consent.
- IP Transfer: Trade mark and domain transfers, plus an IP Assignment for copyright, designs and other intangible rights.
- Transitional Services Agreement: If the seller will provide support (e.g. IT, payroll, or management time) for a period post-completion, document scope, timing and fees.
- Employment Documents: Offers for transferring employees, updated workplace policies, and compliance with any applicable modern awards.
- Restraint/Non-Compete: Restrictions to stop the seller from competing or poaching staff/customers for a reasonable period and area, drafted to be enforceable.
- Releases And Consents: Bank releases, supplier and customer consents, and any third-party approvals required to lawfully complete the transfer.
If the deal is an asset sale heavy on third-party contracts, factor in time for the mechanics and consents. Your approach to each counterpart can be critical, particularly for top customers and strategic suppliers.
Practical Tips To Choose The Right Path
When you’re weighing a share sale versus an asset sale, try this lens:
- Continuity vs Control: Do you need a “no-change” experience for customers and staff (share sale), or do you want to reset contracts and take only what you need (asset sale)?
- Risk Appetite: Can you get comfortable with company-level liabilities (backed by seller warranties/indemnities and due diligence), or is ring-fencing legacy risk a priority?
- Timing And Complexity: Will consents and assignments be manageable on your timeline, or would they put the business at risk if delayed?
- Licences And Regulated Activities: Are there approvals that are difficult to transfer or time-consuming to obtain? If so, keeping the entity in a share sale may be more practical.
- People And Culture: How important is a seamless staff and customer transition? The softer elements matter just as much as the paperwork.
Whichever structure you choose, build in early conversations with landlords, top customers, key suppliers and your bank. Getting their buy-in up front can de-risk the legal steps that follow.
Common Hurdles (And How To Avoid Them)
Change Of Control And Consent Traps
Scan major contracts for clauses that bite on a change of control (share deals) or prohibit assignment/novation without consent (asset deals). Prioritise a strategy for the top 10-20 relationships and agree a clear plan with the seller.
Unclear Asset Lists
In asset deals, anything not listed is typically excluded. Build detailed schedules for assets, stock, IP, records, and data - and specify what stays with the seller.
Data And Systems Access
Map the practical handover: logins, software licences, payment gateways, domain registrar access, CRM and accounting systems. Confirm who controls these and the steps to switch ownership without downtime.
Mismatch Between Price And Risk
If due diligence uncovers risk, reflect that in the agreement - through targeted warranties, indemnities, escrow/retentions, or price adjustments. Don’t rely on generic boilerplate to solve a specific problem.
Key Takeaways
- A share sale buys the company “as is” (continuity and convenience), while an asset sale lets you select what you take and leave most legacy liabilities behind.
- Choose structure based on continuity needs, risk appetite, contract and licence transferability, and your timing and funding constraints.
- Focus your due diligence on contracts, leases, IP, employees, compliance and liabilities, and address findings in the deal terms.
- Use the right documents - a Share Sale Agreement or Business Sale Agreement, plus assignments, lease transfer, IP and employment paperwork - to make the handover work on day one.
- Plan early for landlord, customer, supplier and finance consents to avoid delays at completion.
- Getting tailored legal support early can align structure, risk allocation and practical handover, saving time and reducing deal risk.
If you’d like a consultation on buying a business in Australia - including whether a share sale or asset sale is right for you - you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
