In short
Successfully selling a business in NSW requires thorough preparation before taking the company to market. Vendors must choose between an asset sale and a share sale, obtain landlord consent for lease assignment, establish reasonable and enforceable restraints of trade, reconcile employee entitlements, and negotiate robust liability caps on seller warranties.
Early legal structuring prevents post-completion claims, avoids deal delays, and ensures that you retain the full net value of the sale price at completion.
Should you structure the transaction as an asset sale or a share sale?
The choice of deal structure determines which liabilities transfer to the buyer and shapes the negotiation of contractual warranties:
- Asset sale: The vendor company sells defined assets—including plant, equipment, inventory, intellectual property, contracts, and business goodwill. The purchaser assumes only specified ongoing liabilities, leaving all historical tax debts, employee claims, and legal disputes with the selling company. This is the most common structure for small-to-medium businesses in NSW.
- Share sale: The shareholders sell the issued shares in the company operating the business. The purchaser acquires the entire corporate entity, inheriting all historical assets and liabilities. Vendors must provide comprehensive warranties and indemnities, but individual shareholders may access significant Capital Gains Tax (CGT) small business concessions.
Consult with your accountant and solicitor early to evaluate which structure maximizes after-tax returns while limiting post-completion legal exposure.
How do you assign the commercial or retail premises lease?
If the business operates from leased premises, the sale contract must be conditional on obtaining the landlord's formal consent to assign the lease to the purchaser. Under NSW law, the assignment procedure depends on whether the lease is retail or commercial:
For retail premises governed by the Retail Leases Act 1994 (NSW):
- You must serve a written request for consent on the landlord under section 41;
- You must provide the landlord with updated information regarding the financial standing and business experience of the proposed assignee;
- You must provide an updated Lessor's and Lessee's Disclosure Statement to the assignee at least seven days before requesting consent;
- If statutory requirements are met, section 41A provides that the vendor and any personal guarantors are released from ongoing lease liability once assignment completes.
For commercial leases, the lease contract governs the process. Section 133B of the Conveyancing Act 1919 implies a covenant that landlord consent must not be unreasonably withheld, provided the proposed assignee is financially capable and of good commercial standing.
What makes a vendor restraint of trade enforceable in NSW?
Purchasers pay for business goodwill and will inevitably require the vendor and key principals to agree to non-compete and non-solicitation restrictions after settlement.
Under section 4(1) of the Restraints of Trade Act 1976 (NSW), a restraint of trade is valid to the extent that it is not contrary to public policy. To ensure your restraint is enforceable and protects the legitimate commercial interests of the enterprise without placing an unreasonable fetter on your future livelihood:
- Reasonable duration: Restraints typically range from 6 months to 3 years depending on the business model and client renewal cycles;
- Geographical area: The geographic zone must correspond to the actual operational territory of the business (for example, a 5km radius for a local café, or Greater Sydney for a specialized distributor);
- Cascading clauses: Use structured cascading clauses (such as 3 years, 2 years, 1 year; 20km, 10km, 5km) so that if a court considers the widest term excessive, the narrower term automatically survives;
- Non-solicitation: Explicit covenants prohibiting the poaching of key staff, clients, and suppliers are generally easier to uphold than total industry bans.
How should you limit vendor warranties and contractual liability?
Business sale contracts contain extensive vendor warranties regarding financial accounts, customer relationships, plant maintenance, intellectual property ownership, and litigation history. To protect yourself from unexpected future claims:
- Prepare a comprehensive Disclosure Letter: Disclose all known defects, customer disputes, regulatory issues, and equipment deficiencies in writing before signing. A vendor cannot be sued for breach of warranty regarding matters expressly disclosed in the disclosure pack;
- Liability caps: Cap the vendor's total financial exposure at an agreed percentage of the purchase price (or the actual net cash received);
- De minimis and basket thresholds: Require that individual claims must exceed a minimum amount (e.g. $5,000) and that claims in aggregate must reach a threshold before the purchaser can make a claim;
- Time limits for claims: Limit the warranty limitation period to 12 to 24 months from settlement (or one full financial audit cycle).
What happens to employees and accrued entitlements?
Under Part 2-8 of the Fair Work Act 2009 (Cth), business sales often involve a statutory transfer of business if employees accept offers with the purchaser within three months to perform substantially the same work.
Key employee management steps include:
- Provide the buyer with an accurate schedule of all employees, modern awards, wages, and accrued annual leave and long service leave balances;
- Agree on which staff the purchaser will re-employ and issue formal termination notices to non-transferring employees;
- Calculate settlement adjustments: typically, 100% of accrued annual leave and an agreed percentage (usually 70% to 100%) of accrued long service leave are deducted from the purchase price payable by the buyer at completion;
- Ensure the vendor company pays out all redundancy entitlements, superannuation guarantee contributions, and final wages for staff not transitioning to the purchaser.
How do you release PPSR security interests and transfer title?
The purchaser must receive clear legal title to all plant, machinery, stock, and equipment. You must search the Personal Property Securities Register (PPSR) against your company and business name.
If banks, vehicle financiers, or suppliers hold registered security interests over business assets, you must obtain formal Deeds of Release or Financing Change Statements from each secured party prior to settlement. The buyer's solicitor will not release settlement funds without verified PPSR discharge undertakings.
What essential steps must vendors complete before exchanging contracts?
Work through this step-by-step pre-exchange checklist:
- Collate audited financial statements, tax returns, and current management accounts;
- Gather registered trademark certificates, business name records, and domain ownership details;
- Review the premises lease, expiry dates, and options to renew;
- Prepare the asset register and verify clear title free of encumbrances;
- Have our solicitors draft the Contract for Sale of Business and tailor the vendor warranties;
- Obtain tax advice regarding eligibility for the GST Going Concern exemption under section 38-325 of the GST Act.
Our commercial team provides full vendor representation across our sale and purchase of business services, commercial contract drafting, and corporate structuring.
Are you planning to sell your business in New South Wales?
Biz Lawyers & Advisory guides business founders and corporate owners through contract preparation, lease negotiations, PPSR discharges, and smooth transaction completion.
Contact Biz Lawyers & Advisory or call 1800 893 836 for strategic business sale counsel.
This article provides general information only. It is not legal, taxation, or accounting advice. Selling a business involves complex tax, employment, and contractual obligations that require tailored professional advice.
Primary sources
Law and guidance checked 27 August 2026.
