Also known as a ‘statement by a vendor of a small business’, this document is required to be given to the buyer when selling a business valued at $450,00 or less that does not have a liquor licence. It is usually completed by the seller and their accountant.
This statement provides a due diligence guide for a buyer and sets out the financial performance of the business over the last two years, and the current year up until the last quarter.
The failure to provide an accurate section 52 statement has serious consequences. The buyer can cancel the sale within 3 months as long as they haven’t taken possession of the business. This can delay or even stop the sale, and may lead to legal or regulatory issues. To avoid these problems arising, make sure the Section 52 Statement is prepared and given to the buyer before they sign the contract of sale.
When you engage a business broker they will require you to sign a sale authority to confirm the terms of their engagement and commission payable. Beware that the terms of the sale authority might mean that commission is payable even if the purchaser cancels the contract or fails to settle! It is important that you have the sale authority reviewed prior to signing so that you are aware of your obligations.
There is no automatic guarantee that your current landlord will approve a transfer of lease to the new purchaser and you will need to obtain the landlord’s consent to transfer the lease.
The Retail Leases Act 2003 sets out the procedure for obtaining the landlord’s consent. If the seller has complied with the procedure and the landlord does not respond within 28 days then the landlord is considered to have consented to the transfer.
The seller usually prepares the transfer of lease for approval by the landlord and buyer. Beware that if you are a retail lease, a disclosure statement must also be provided to the purchaser.
An assistance period is a period of time before or after settlement where the seller helps the purchaser adjust to managing the business. This involves introducing the purchaser to suppliers, customers, and providing help and advice about running the business. The seller usually is not paid during this assistance period.
Your contract will state whether stock at settlement is to pass to the purchaser and what the maximum value of the stock will be. There may even be clauses about the valuation of stock if this is not agreed. The value of stock is usually paid by the purchaser in addition to the purchase price.