M&A – Main differences between Share Deals and Asset Deals in Australia

• The buyer assumes all businesses carried on by the target company, unless specifically carved out.
• All liabilities remain with the target company, subject to any indemnities given by the seller in the share sale agreement (the SSA). 
• If the seller is a parent company, subject to the terms of the company’s constitution, or listing rules of the Australian Securities Exchange (if the seller is a listed entity), shareholder approval may be required.
  
• The terms of contracts (including leases) held by the target company will need to be reviewed to determine whether they contain a ‘change of control’ clause which will require the seller and buyer to obtain the consent of the other party to avoid a termination event – this can be quite time consuming and prolong the time to complete the transaction. 
• If the transaction is a cash free/debt free transaction, the seller will need to pay-out any debt or debt like items. The seller will need to secure the release of security interests (e.g. an encumbrance) registered on the personal properties security register (PPSR) over any assets of the target company or the target shares themselves prior to completion. 
• If the buyer is a foreign company, or an Australian company controlled by a foreign company, then approval of the Foreign Investment Review Board (FIRB) may be required. 
• If there is a risk that the transaction may have the effect, or be likely to have the effect, of substantially lessening competition in a market, then the parties may need to engage with the Australian Competition and Consumer Commission (ACCC) to determine whether the ACCC would oppose the transaction.
  

• Parties can pick and choose whether the asset transfer will consist of all or part of the business, however, the sale of part of the business will mean that the transaction is subject to 10% goods and services tax (generally payable by the Buyer as a gross up on the purchase price).
• The liabilities of the business accrued prior to completion will generally remain with the seller unless the buyer agrees to assume liabilities.
• Subject to the terms of the company’s constitution, or listing rules of the Australian Securities Exchange (if the seller is a listed entity), shareholder approval may be required.
• The assignment of contracts (including leases) will require the consent of the other party – this can be quite time consuming and prolong the time to complete the transaction.
• If the buyer is taking on employees, the seller will need to terminate the employment contracts with the employees and the buyer will need to offer employment to those employees on terms no less favourable to the employees overall than their terms of employment with the seller. Australian employment law will generally require the buyer to recognise the service based entitlements of the employee accrued while working for the seller.
• If the assets being transferred are subject to a security interest (e.g. an encumbrance) registered on the PPSR, the seller will need to obtain their release prior to completion.
• If the buyer is a foreign company, or an Australian company controlled by a foreign company, then approval of FIRB may be required.
• If there is a risk that the transaction may have the effect, or be likely to have the effect, of substantially lessening competition in a market, then the parties may need to engage with the ACCC to determine whether the ACCC would oppose the transaction.
  

• The Australian Securities and Investment Commission (ASIC) needs to be notified by the target company of the transfer of shares within 28 days of when the transfer of shares occurs.
• Transfers must be recorded in the target company’s records. 
• If the transaction requires a change in company directors and company secretary, then ASIC must also be notified of that change within 28 of when the change occurs.
  
• If duty is payable on the transaction (see below) then the transaction documents will need to be lodged with the relevant state or territory revenue authorities for stamping.
• If the target company is part of the seller’s tax consolidated group, then the target company will need to be released from that group prior to completion and lodge necessary documentation with the Australian Taxation Office.
  

• If duty is payable on the transaction (see below) then the transaction documents will need to be lodged with the relevant state or territory revenue authorities for stamping.
• If ownership of any of the assets needs to be registered (e.g. land and vehicles), then transfer notices will need to be lodged with the relevant authority in the state or territory where the asset is registered.
• Notice will need to be given to customers and supplies to update their payment and contact records.
• If the sale involves the transfer of a registered lease (note not all leases in Australia are required to be registered), then the transfer of lease will need to be notified to the land authority in the relevant state or territory.
  

The transfer of shares may result in taxable capital gains for the seller.

Goods and services tax will not be payable on the transfer of shares.

Transfer taxes are regulated by each state and territory. Many states and territories have abolished transfer duty on the transfer shares unless the company is a ‘land rich entity’. Generally, under legislation both the buyer and seller are jointly liable for transfer duty, however as a matter of custom, the parties will contractually agree that the buyer is liable for transfer duty.

The transfer of a business may result in taxable capital gains for the seller.

As noted above, if the assets being transferred are not everything that is necessary for the continued operation of the business as conducted by the seller immediately prior to completion, then the transfer price will be subject to goods and services tax (i.e. 10%).

Transfer taxes are regulated by each state and territory. The rate of duty will depend on the value of the transaction, and the duty payable can depend on the allocation of the purchase price amongst the assets (i.e. certain assets may not attract duty depending on the structure of the transaction and the nature of the assets). Generally, under legislation both the buyer and seller are jointly liable for transfer duty, however as a matter of custom, the parties will contractually agree that the buyer is liable for transfer duty.