Do I need a section 52 if I’m selling my business in Victoria?
What is a section 52?
It is a reference to Statement by a Vendor of a Small Business used during the business sale process which is a document that the vendor prepares for the purchaser of a small business.
Recently the legislation was changed to include businesses up to a purchase price of $450,000.
A Section 52 is a document that sets out the details of the business, profit and loss for 2 periods , assets and opening hours among other things. The document is prepared by the vendors accountant to provide information so a purchaser can make an informed decision about the business.
The section 52 needs to be no more than 3 months old so is often prepared once negotiations are well progressed but before the sales agreement or contract are signed and before the deposit is paid.
What if I don’t provide a section 52 ?
If you are selling a small business in Victoria, you need to prepare a Section 52 Statement. If you don’t provide the vendors statement and give it to your Purchaser before the Purchaser signs the Contract and pays a deposit , the Purchaser can walk away from the deal within 3 months of signing any agreement up until settlement and get their deposit back from you.
The consumer affairs website provides this information
This statement is required for the sale of a small business at a price up to $450,000. It is usually completed by the seller and their accountant using the form prescribed under the Estate Agents (General, Accounts and Audit) Regulations 2018.
The statement provides a due diligence guide for a buyer and sets out the financial performance of the business over the last two years. From 20 May 2018, the statement must also provide the financial performance for the current financial year up to the most recent quarter. If the statement is not provided to the purchaser, the contract can be voided.