Selling a small business? Don’t get caught out with the new law changes
By Phillip Leaman
24 July 2018
On 20 May 2018, the Estate Agents (General, Accounts and Audit) Regulations 2018 came into force. The regulations provide for the Section 52 Statement which is required to be provided to purchasers by vendors of small businesses.
Prior to the law change, a small business was defined as one with a sale price under $350,000. The new regulations change the definition of what counts as a small business. The new definition requires a Section 52 Statement be provided to purchasers by vendors for small business sales priced under $450,000.
The Section 52 Statement has also been amended to reflect changes to the Business operating report. The Statement now includes the requirement for the vendor to give purchasers a disclosure statement in accordance with their obligations under the Retail Leases Act 2003.
So what happens if a vendor does not comply with the new requirements of Section 52 of the Estate Agents Act?
If the vendor does not give the purchaser a Section 52 Statement, or the statement they issue is not completed properly, the purchaser is likely able to avoid the contract and get back any deposit paid. The purchaser must act within 3 months of the date the contract is signed, and before they take possession of the business.
A vendor who fails to provide a statement is also liable to a 10 penalty unit fine.
If an estate agent is acting in the sale of the business and the estate agent obtains the signature or takes the deposit without a statement being provided, the estate agent also faces a 10 penalty unit fine.
Often small business transactions create the most problems for vendors. It is important to properly document the transaction irrespective of the value of the sale. Dealing with employees and their entitlements following a transfer is also an issue frequently overlooked by vendors.
Make sure you document your transaction right and seek legal advice from an experienced lawyer.