Selling Pty Ltd Shares? Share Sale Agreement Template

Under section 1070A of the Corporations Act 2001 (Cth), a share is personal property, transferable in the manner the constitution allows. Every private sale therefore runs on two tracks. The first is the contract between vendor and purchaser, often called a share transfer agreement, which fixes the price, conditions, warranties and completion mechanics. The second is the instrument of transfer, the short form the company relies on to register the new holder. Many owners treat that form as the whole transaction. It is not: it records the shares and the consideration, and nothing about what happens if the accounts were wrong or the vendor opens a competing business six months later.

A share sale also differs sharply from a business sale. When you buy assets, you choose what you take. When you buy shares, you inherit the company with its whole history: tax returns, employee entitlements, leases and any claim that has not yet surfaced. That is why warranties carry so much weight here. It is equally distinct from a share issue under section 254A, where the company creates new shares, and from a shareholders agreement for Pty Ltd companies, which governs how owners run the company together rather than how one of them leaves.

The Corporations Act 2001 (Cth) governs registration rather than the commercial bargain. Under section 1071B(2), a company must not register a transfer unless a proper instrument of transfer has been delivered to it. For proprietary companies, the replaceable rule in section 1072G gives directors a general discretion to refuse registration, and section 1071F requires notice of any refusal within two months of lodgement. Many constitutions add pre-emption rights in favour of existing members, so the company constitution adopted under section 136 must be read before any price is agreed. Once the transfer is registered, the company updates its register of members under section 169 and, under section 178A, notifies ASIC within 28 days on Form 484; where a share class has more than twenty members, only changes affecting the top twenty are reported. ASIC sets out the process in its guidance on notifying a change to the members register.

Tax law runs alongside. The sale is CGT event A1 under section 104-10 of the Income Tax Assessment Act 1997, and the market value substitution rule in section 116-30 can replace the agreed price where the parties are not dealing at arm's length. If the vendor is a foreign resident and the shares are an indirect Australian real property interest, Subdivision 14-D of Schedule 1 to the Taxation Administration Act 1953 requires the purchaser to withhold 15 per cent of the price, unless the vendor gives a valid declaration under section 14-225. Foreign purchasers acquiring a substantial interest may need approval under the Foreign Acquisitions and Takeovers Act 1975. Finally, section 18 of the Australian Consumer Law can apply to statements made in negotiations, and an entire agreement clause does not exclude that liability.

The most common trigger is a co-founder exit. One owner wants out, the other wants to keep running the business, and the departing stake has to be priced, paid for and transferred without loose ends. The second is succession in a family company, where parents sell shares to a child over several years, often with instalments funded from dividends. If no money changes hands, a sale is the wrong vehicle, and a deed of gift drafted under Australian law records the intention more cleanly, although CGT is still assessed at market value. Investors use the agreement to increase an existing stake without diluting other members, and trade buyers use it for the full acquisition of a Pty Ltd whose contracts, licences and staff stay in place. It also completes a deadlock buy-out or leaver process under an existing shareholders agreement.

Two edge cases deserve attention. If the company is trustee of a discretionary trust holding Queensland property, duty can apply to the share acquisition even though no land is transferred. If the shares are subject to a security interest, the lender may have registered it on the Personal Property Securities Register or perfected it by control, typically by holding the share certificate, and completion must not occur until the secured party has released it in writing.

• The sale shares are described by class, number and paid-up status, and the vendor sells them with full legal and beneficial title. The purchaser checks for options and security interests by searching the register kept under the Personal Property Securities Act 2009 (Cth) and asking who holds the certificate.
• The purchase price and payment terms support a single completion payment, a deposit with balance, deferred instalments or an earn-out. Where part of the price is deferred, the vendor can hold security over the sale shares until the final payment clears.
• The conditions precedent list written pre-emption waivers, board approval, FIRB clearance where required, and consents from counterparties whose contracts contain change of control clauses. A sunset date lets either party walk away if a condition fails.
• The completion deliverables cover the signed transfer form, the original certificate or a lost certificate indemnity, resignations of vendor-appointed directors and the settlement of loan accounts.
• The warranties and limitations schedule covers title, capacity, accounts, tax, employees, litigation and material contracts. Time limits, a minimum claim threshold and a cap expressed as a proportion of the price give the vendor certainty, while a disclosure letter carves out known issues.
• The vendor restraint stops the departing owner from competing or soliciting clients. Courts uphold restraints protecting purchased goodwill more readily than employee restraints, and where the vendor stays on staff, a restraint of trade deed for Australian employers covers the employment side.
• The tax and duty clause of the share sale agreement allocates the cost of any landholder duty, handles withholding declarations and records that the sale is an input taxed financial supply for GST.

Duty follows the location of the land, not the state where the company is registered, so a Sydney company with a Brisbane warehouse needs a Queensland analysis.

New South Wales no longer charges ordinary transfer duty on shares in unlisted companies. The exception is landholder duty under Chapter 4 of the Duties Act 1997 (NSW), triggered when a purchaser acquires 50 per cent or more of a private company whose New South Wales land holdings reach the statutory value threshold. For acquisitions on or after 1 February 2024, the linking threshold used to trace land held through subsidiaries and trusts fell from 50 to 20 per cent, so a minority unit holding can now bring a property trust's land into the count. New South Wales is also the only state with a restraint statute: section 4 of the Restraints of Trade Act 1976 (NSW) lets a court read down an excessive restraint.

Victoria applies the landholder provisions of the Duties Act 2000 (Vic) above a lower land value threshold than New South Wales, Queensland or Western Australia. The significant interest for a private company is 50 per cent, while land held through linked entities is traced at 20 per cent. An interest can also arise without shares moving, for example through a variation of share rights. Restraints are judged at common law, so cascading drafting carries real weight.

Queensland is where private share sales most often produce unplanned duty. Under the Duties Act 2001 (Qld), landholder duty applies to an acquisition of 50 per cent or more of an unlisted company with Queensland land above the threshold. Corporate trustee duty is the distinctive trap, reaching the purchase of a company that acts as trustee of a discretionary trust, or of a company that owns that trustee. Foreign purchasers may also face additional foreign acquirer duty on residential land held through a landholder.

Western Australia charges landholder duty under the Duties Act 2008 (WA) when a person acquires at least 50 per cent of an unlisted landholder. Land is traced through linked entities, and acquisitions by related persons or separate steps forming one arrangement are aggregated, so a second acquisition can trigger duty that the first did not.

You start by naming the company and confirming whether it, or any entity it controls, holds land in Australia, and in which states. Those answers set the duty clauses and flag whether a landholder assessment is needed. Next come the parties: individuals, corporate vendors and trustees each sign differently, and corporate parties execute under section 127 of the Act, including by electronic signature. You then describe the sale shares by class and number and choose a payment structure.

The questionnaire then asks which conditions apply and what level of warranty protection the purchaser expects. A founder buying a minority stake from a colleague rarely needs the full schedule a trade buyer would demand, and the form scales accordingly. Restraint periods, the completion date and a sunset date follow. At the end you download the agreement with a completion checklist, a share transfer form and a directors' resolution approving registration, plus the details the company secretary needs to lodge Form 484.

The error we see most often in a private share sale agreement is ignoring the pre-emption clause. A sale agreed between two members while a third holds a right of first refusal gives the directors grounds to refuse registration, and if the transfer is registered anyway, the excluded member can apply to have the register corrected under section 175 or seek orders under sections 232 and 233. The second mistake is handing over a signed transfer form before the price is paid, because once the transfer is registered, an unpaid vendor is just an unsecured creditor. Hold the signed form in escrow until cleared funds arrive.

Loan accounts cause the third problem. If the vendor owes the company money and the debt is forgiven at completion, it can be treated as a deemed dividend under Division 7A of the Income Tax Assessment Act 1936; if the company owes the vendor, the loan must be repaid or assigned to the purchaser. Fourth, families often set an artificially low price, forgetting that the market value substitution rule applies whatever the agreement says. Finally, many companies complete and then forget the administration, and a Form 484 not lodged within 28 days triggers ASIC late fees and leaves the public record showing the wrong owner.