Share Transfers

Share Transfers

Transferring shares in a company is a significant legal transaction that must be carried out properly to protect the interests of all parties involved. A share transfer involves the legal transfer of ownership of shares in a company from one party (the transferor) to another (the transferee). This process changes the company’s ownership structure and may affect voting rights, dividends, and control of the business. Whether you are buying or selling shares, restructuring your business, or transferring shares between family members, obtaining legal advice ensures the transfer complies with the applicable legislation and your company’s governing documents.

We provide end to end legal support tailored to your specific circumstances. Our services include:

  • Clear advice on your rights and obligations
  • Identifying and managing legal risks
  • Drafting and reviewing all required documentation
  • Liaising with accountants, brokers, and other advisors
  • Ensuring the transfer is legally valid and enforceable

We focus on practical solutions that protect your interests while keeping the process efficient and transparent.

Seller Advantages in an Asset Sale

An asset sale allows a seller to exclude from the sale assets that the seller does not wish to transfer.

An asset sale may also allow the seller to retain some rights over intellectual property.  The seller may wish to keep the intellectual property and license it to the buyer.

Disadvantages of an asset sale include the following:

  1. An asset sale may require the approval of third parties such as suppliers to the business or, if the business is premises based, the consent of the landlord to the lease being assigned to the buyer, or a new lease being granted to the buyer.
  2. The liabilities of the business are usually not transferred to the buyer. The seller has to deal with the liabilities.  This may be achieved by allocation of the purchase price or part of the purchase price to the liabilities.

The advantages to the buyer may include the following:  

  1. The tax benefits of accrued losses that may be carried forward by the Buyer.
  2. No GST is payable on an asset sale of a business that is a going concern.
  3. The buyer has the option of seeking to exclude from the sale any assets it does not require.

The disadvantages to the buyer are that:

  1. It needs to pay stamp duty.
  2. Suppliers who are important to the business do not agree to continue a supplier arrangement, or to enter into a new supplier arrangement with the purchaser.
  3. The landlord of the business premises from where the business operates does not consent to an assignment of the existing lease or offer a new lease to the buyer.
  4. Some assets such as government licenses and permits may not be assignable to the buyer.

Let us now turn to and look at the share transfer as a means of sale of a business

Seller Share Transfer Advantages
  1. There is no stamp duty on a share transfer. Although this is a direct benefit to the buyer, it is an indirect benefit to the seller as it reduces the costs of sale and makes the business easier to sell.
  2. In many cases a transfer of shares will not affect current supplier arrangements. It may also not affect a current lease, although many leases contain a clause that require landlord approval if there is a change in the ownership of a corporate tenant.
  1. The company retains its liabilities, and a buyer may not be attracted to a share transfer unless the seller or person standing behind the company such as directors and shareholders provide adequate warranties and indemnities to protect the buyer from these liabilities. Practically, this may result in the buyer insisting on indemnities that are secured by personal guarantees from the directors of the company and the buyer may require the personal guarantees obligations of the directors to be secured over property of the directors, or by a bank guarantee.
  2. The constitution of the company and/or a shareholders agreement may contain clauses which restrict share transfers to third party buyers. These documents may contain pre-emptive rights that require any share offer for sale to a third party to be first offered to an existing shareholder.

The primary advantages to the buyer are as follows:

  1. Stamp duty is not payable in most instances on a share sale.
  2. Leases, supply agreements and intellectual property rights are already in place and there is usually no need for an assignment that requires the approval of third parties. In some instances, the assignment of a lease may require the consent of the landlord on a share sale if there is the clause requiring such consent on a change in ownership of the company.
  3. If the company has goodwill and brand recognition, these will be transferred with the shares.

There are disadvantages to the buyer in a share sale. These disadvantages include:

  1. The company retains its current and contingent liabilities including any tax liabilities. Indemnities and warranties, even secured by bank guarantees and personal guarantees may not ultimately fully indemnify a buyer from exposure to the company’s liabilities;
  2. Further not all liabilities of the company may have been disclosed by the seller. Even an extensive due diligence may identify some but not all liabilities.

These matters in general terms are some but not all the matters that a seller and a buyer of a business must consider before deciding on how the business should be sold.  Professional advice, including legal advice, should be sought as early as possible to assist in making this decision and to ensure that no key legal or commercial issues are overlooked.

If you are considering a share transfer in Queensland, early legal advice can prevent costly mistakes and delays. We provide clear, practical guidance to make the share transfer process efficient, compliant, and stress-free.

Contact us today to discuss your share transfer and find out how we can assist..

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