If you are a business owner and have ever thought about selling your business there is a good chance you’ve come across the term ‘Section 52’. Now be honest…did your mind immediately start to wander?
If this applies to you then keep reading …
What is a Section 52?
The phrase ‘Section 52’ refers to the disclosure statement that a vendor of a small business in Victoria is required to provide to a prospective purchaser under Section 52 of the Estate Agents Act 1980 (Vic) (Act). It is important to note that this disclosure statement must be given to a purchaser before a purchaser signs a Contract of Sale of Business.
Are you sure I have to prepare one?
Not every vendor looking to sell its business is required to prepare a Section 52. A Section 52 must only be prepared if you are selling your business for a total price of $350,000 or less.
Please, can you make an exception for me, just this once?
Interestingly, the Act does provide for one strange exception. If your business has a licence or permit in force under the Liquor Control Reform Act 1998 (Vic), it is not required to prepare a Section 52, irrespective of the total purchase price of the business. While this seems to be a strange quirk in the law, it is something that business owners should be aware of when considering selling their business.
Too complicated?
While the phrase Section 52 might sound intimidating at first, you shouldn’t worry. Most accountants are able to prepare them with relative ease and at a reasonable cost. Care should be taken however, to ensure that the Section 52 is prepared in the appropriate format. If you are unsure or suspect that your Section 52 may not have been prepared correctly then check Form 2, Regulation 7 of the Estate Agents (General, Accounts and Audit) Regulations 2008 (Vic), which sets out the exact format and content that the Section 52 must contain. Alternatively, click here for convenience, or better still speak to one of us.
What if I just ignore it?
Vendors of a small business should not take the requirement to provide a Section 52 lightly. In fact, if you are selling a small business and fail to provide a Section 52 before the purchaser signs the contract (or fail to do so in the prescribed form), then:
- the purchaser may be able to walk away from the contract;
- the purchaser may claim its entire deposit back from you; and
- the vendor may be liable for a cheeky fine in excess of $1,500.
The purchaser does need to be vigilant in exercising such powers by providing notice in writing within 3 months of signing, but provided it is before it takes possession of the business.
Ok, I’m convinced
So, if you’re a business owner and you think any of this might apply to you be sure to speak to one of our lawyers to get some clear advice on whether you need a Section 52.
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Posted on: 7 June 2016
