Agreeing a price does not settle what you are buying. An asset purchase and a share purchase can involve the same trading business but require different investigations and contract protections.
In an asset purchase, the buyer acquires the agreed assets rather than the shares in the seller’s company. In a share purchase, the buyer acquires shares in the company that operates the business. The company remains a separate legal entity; its existing obligations do not disappear because its shareholders change. Business Queensland’s purchase guide
Define what the price includes
For an asset purchase, ask for a clear schedule of what is included and excluded. Consider equipment, stock, intellectual property, the business name and the arrangements needed to use the premises. Identify assets owned by someone other than the seller.
For a share purchase, identify the company, the shares being acquired and any other shareholders who will remain. Review how control will work after completion, particularly if the purchase is for less than all the shares.
The offer should describe the proposed structure accurately. Do not leave it to a later conversation if the seller and buyer have different understandings of the deal.
Investigate liabilities without relying on labels
An asset purchase should not be described as automatically free of liabilities. Review what the contract says the buyer will assume, which assets are subject to security interests and whether other obligations arise under applicable law.
For a share purchase, investigate the company’s history as well as its current trading results. Ask for records concerning borrowing, tax, employees, disputes and significant contracts. The purchase agreement should address identified risks rather than relying on a general assurance that the business is profitable.
For both structures, prepare an issues list linking each concern to the evidence still needed, the proposed contractual treatment and the person responsible for resolving it. Our business-purchase due diligence guide covers the broader review.
Check leases, contracts and operational permissions
List the agreements the business needs to keep operating. For each, have the relevant transfer, consent and change-of-control provisions reviewed against the proposed structure.
An asset purchase may require arrangements to transfer or replace agreements. A share purchase does not justify assuming that no consent is needed: the wording of an existing agreement may address changes in ownership or control.
Put consent requirements and deadlines into the transaction timetable. If the premises are essential, review the lease early. See our Queensland lease-assignment service.
Plan employee arrangements separately
Identify the current employer and whether employees will work for a different entity after completion. Then obtain advice on the proposed offers, continuity of service and entitlements.
The Fair Work Ombudsman explains that a transfer of business can affect employees’ entitlements and that specific conditions determine whether the transfer-of-business rules apply. Avoid assuming either that every employee must start again or that every entitlement is treated identically. Fair Work guidance when businesses change owners
Compare the tax position before choosing
Ask your accountant and lawyer to assess the proposed structure together, including the assets involved and the parties’ circumstances. Do not choose a share purchase on a blanket assumption that it avoids Queensland duty.
QRO provides separate guidance for business transactions, shares and landholder duty. The relevant treatment needs to be checked against the particular acquisition. This article does not calculate duty or recommend a tax structure. QRO guidance for businesses, trusts and investors
Questions to settle before signing
- What exactly is being acquired, and who owns it?
- Which obligations will remain with the seller or company, and which will the buyer assume?
- Which consents, releases or new arrangements are needed?
- What investigation remains outstanding?
- What must happen before completion, and what does the contract provide if it does not happen?
Keep the answers consistent across the offer, purchase agreement, finance arrangements and settlement checklist.
Is one structure always better?
No. The practical choice depends on the business, the risks identified, the consents required, the parties’ objectives and the tax advice. A structure that suits one transaction may create unnecessary difficulty in another.
For contract review and completion support, see our business purchase service. For a scoped investigation, see business due diligence. Before committing, provide the proposed offer, entity details and the available lease and business documents so the structure and contract requirements can be considered together.
This article is general information, not legal, financial or tax advice for a particular acquisition. Obtain advice on the actual documents and proposed transaction before signing.
