A well-drafted sale of business contract is key to a smooth transaction. You should consider including the following in your contract:

1. What are the commercial details?

Your sale of business contract must clearly set out the commercial details of the transaction. This includes vendor and purchaser details, the purchase price, settlement date, any guarantors, and the assets included in the sale. You should consider whether things like property fixtures or trading stock form part of the sale or remain separate from the transaction.

2. Any conditions to the sale?

If the sale transaction is conditional on certain things, these should be detailed in the contract.

3. Any restraints of trade?

A restraint of trade clause prevents the vendor from soliciting clients, customers, suppliers or employees from the purchaser or competing with the purchaser’s business for a specified period and/or in a certain area.

A restraint of trade clause that goes further than necessary to protect the legitimate business interests of the purchaser will be unenforceable and void.

4. What will happen to employees?

Your contract should address whether the sale has the effect of transferring or terminating employees.

Sellers must comply with their obligations under the Fair Work Act 2009 (Cth) when dealing with employees. They must honour any employee entitlements such as annual leave, flexible working arrangements, and sick leave. Employees who are not transferred to the new business may be entitled to redundancy pay.

5. What happens to your intellectual property?

Intellectual property rights include your phone numbers, trade marks, social media accounts, copyright, designs and patents. Your contract should clearly set out who retains ownership of these rights, and whether they are licenced or transferred as part of the sale.

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