Checklist for Purchase of a Business - Contracts and Commercial Law

If you are considering buying a business it is important to do your due diligence. This checklist provides a number of the things you should ensure you are across before finalising your transaction. If you are buying a business and have questions please reach out to our team for assistance.

1. Restrictions on transfer

1.1 Restrictions on the seller:

(a) memorandum and articles of association

(b) ASX listing rules

1.2 Restrictions on the buyer:

(a) ASX listing rules

(b) TPA s5O, s5OA

(d) what licences, permits are necessary for conduct of the business?

2. The Parties

2.1 Identity of the seller searches of:

(a) business name

(b) trade or service mark

(d) inspection and registration of motor vehicle

(e) statutory permits and licenses

(f) income tax returns

(g) payroll tax returns

2.2 Capacity of the seller searches of:

(a) bills of sale register

(b) bankruptcy register (if individual)

(d) winding up applications

(e) chattel securities register

2.3 If multiple sellers:

(a) apportionment of purchase price

(b) joint or several liability

2.4 Identity of the buyer:

(a) sole trader

(b) partnership

(d) company

(e) joint venture

(f) others

2.5 If joint buyers:

(a) respective contributions

(b) respective roles

3. The Assets

3.1 Plant and equipment:

(a) obtain list and verify

(b) determine which are owned and which are leased or hired

(d) obtain details of finance arrangements for leased or hired assets

3.2 Stock:

(a) stock levels

(b) method of valuation

(d) retention of title clauses

3.3 Debtors:

If to be purchased:

(a) method of valuation

(b) bad and doubtful debts

If not to be purchased:

(a) method of collection

(b) enforcement by seller

3.4 Goodwill:

(a) value

(b) business names – ascertain availability:

(i) seller's name

(ii) product names

(i) geographical area

(ii) time limit

(iii) business or products

(iv) persons restrained

(d) instruction by seller:

(i) before completion

(ii) after completion

3.5 Intellectual property:

(a) obtain lists

(b) agree values

(d) inspect user agreements

3.6 Premises:

(a) property searches

(b) acquire or lease?

(d) agree terms of occupancy arrangement

(e) inspect existing lease:

(i) rent

(ii) outgoings

(iii) term

(iv) option

(v) permitted use

(f) consents required for transfer or entering new arrangement:

(i) third parties

(ii) statutory

3.7 Financing requirements for the acquisition and long-term operation, including lender's guidelines and security requirements

4. The Liabilities

4.1 Current liabilities:

(a) Is vendor up to date on current terms?

(b) agreed method of payment

4.2 Contingent liabilities:

(a) obtain details

(b) agree method of fulfilling

4.3 The Contracts

(a) Inspect all material contracts

(b) What consent is necessary for assignment?

(d) What contracts will buyer have to initiate?

5. The Staff

5.1 List – identify key staff

5.2 Review employment contracts of key employees

5.3 Transfer of entitlements:

(a) annual leave

(b) long service leave

5.4 Review of remuneration and terms

5.5 Superannuation fund

5.6 Employment of seller

5.7 Agree timing, method of informing staff

5.8 Termination of staff not re-employed

5.9 Restraints

6. The Price

6.1 Cash or terms:

(a) collateral guarantees

(b) security

6.2 Shares:

(a) available unissued capital

(b) CASA

7.1 Financial

7.2 Business

8. The Records of the business

8.1 Takings

8.2 Wages

8.3 Bank accounts

8.4 Age of debtors

8.5 Credit terms

8.6 Insurance litigation

8.7 Service agreements

8.8 Long term contracts

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Australia: Checklist for Purchase of a Business