Overview
Key Considerations for Share Transfers
Transferring shares in a company that owns a business is an alternative method of selling a business, although it is less common than selling assets. This approach involves transferring ownership of the entire company, including all of its assets and liabilities, to the buyer.
When purchasing a company through a share transfer, the buyer acquires everything associated with the business—"warts and all." This means the buyer takes on both the benefits and potential risks, including any outstanding liabilities.
For a successful share transfer, the buyer must ensure that the company is in good standing by thoroughly assessing the following areas:
- Potential customer or supplier disputes
- Adverse tax liabilities
- Latent or hidden liabilities
- Compliance with all regulatory requirements
Key Considerations for Share Transfers
In Queensland and across Australia, transferring shares in a company requires careful attention to both state and federal laws. The buyer assumes ownership of all company assets and liabilities, making thorough due diligence crucial.
Corporate and Tax Obligations
Under Australian corporate law, a share transfer must comply with the Corporations Act 2001 (Cth), which governs the rights and obligations of shareholders. Additionally, the Australian Taxation Office (ATO) requires that any capital gains resulting from the transfer be properly reported and taxed. Both the seller and buyer should carefully evaluate any potential tax liabilities or obligations.
Customer & Supplier Contracts
Share transfers can affect existing contracts with customers and suppliers. It's essential to review these agreements to ensure that they remain enforceable post-transfer, or whether any renegotiations may be necessary to align with the new ownership.
Regulatory Compliance
A key component of any share transfer is ensuring compliance with industry-specific regulations. In Queensland, this may include licensing requirements, local environmental regulations, and compliance with Fair Work Australia if employees are part of the transaction. Non-compliance can result in significant penalties or voiding of the sale.
Due Diligence and Latent Liabilities
Latent liabilities, such as undisclosed debts or pending legal disputes, can pose a serious risk. A comprehensive due diligence process, aligned with federal and QLD-specific regulations, is essential to mitigate these risks. It's important to review all potential liabilities, including taxation, employee entitlements, and any ongoing contractual obligations.
Disclaimer: This information is designed for general information in relation to Queensland Business Property Law. It does not constitute legal advice. We strongly recommend you seek legal advice in regards to your specific situation. For expert advice call 1300 590 613 or chat via live chat to arrange free initial advice.
Facing Legal Challenges? Contact us for expert advice on your legal issues.
Get in Touch We’re here to provide personalised support for your specific needs.