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Changing owners of a business

Changing the owner of a business involves transferring ownership of the business asset. If a business is solely owned by one spouse and is put in joint names with the other spouse, the law regards the spouse as transferring an interest in the business to the other spouse. For this reason stamp duty is payable on any change of ownership in the business. Stamp duty is assessed on the value of the interest being transferred. That value is the net value of the interest being transferred. This is calculated by deducting the debts attached to the interest from the gross value of the interest. Current financial statements including a profit and loss account must be lodged with the transfer document at the Stamp Duties Office. The Stamp Duties Office may choose to value the business by capitalising its income rather than having regard to market value. Whichever method achieves the most realistic result can be used.

A change in ownership of a registered business name must be registered within twenty eight days at the Corporate Affairs Commission. Both the vendor and purchaser must sign this form. If the vendor is unwilling to sign, the form must be lodged with the purchaser's signature and a statutory declaration explaining why the vendor has not signed the form.

A Form 2 under the Land and Business (Sale and Conveyancing) Act 1994 (SA) must also be prepared by the vendor, see cooling off.

The Australian Taxation Office may also require proof that there has been a transfer of ownership and for this reason a contract for sale and purchase is usually desirable as a record of the transfer.

Resignation of a partner

Partners wishing to resign from a partnership must comply with certain formalities. If they do not they can still be regarded by other people as a partner and therefore responsible for debts incurred after their 'resignation'.

To dissolve a partnership it is necessary to prepare a Notice of Resignation, an example of which is provided below.

The following procedure must be followed:

  1. Serve a copy of the Notice of Resignation on all other partners.
  2. Serve a copy of the Notice of Resignation on all current and past creditors of the partnership.

    This will allow the retiring partner to avoid any debts incurred with these creditors by the other partners after dissolution but not any debts outstanding at the time of dissolution.
  3. The notice must then be published within fourteen days of the resignation in the Government Gazette at a cost of about $45.

    This will protect the retiring partner from any creditors who may do business with the other partners but only after the publication of the notice.
  4. If the partnership has a registered trading name it will also be necessary to complete a Change in Proprietors of Business Name form. These are available from the Office of Consumer and Business Affairs.

If the above procedure is complied with, the resigning partner is not liable for debts incurred after the resignation. The resigning partner is still liable for debts previously incurred, although the continuing partners will often agree to pay those debts and 'indemnify' the resigning partner if necessary. However, if the remaining partners can not pay a debt that they have indemnified, the creditor can still take action against the retiring partner. It is recommended that legal advice be sought prior to resigning from a partnership.

SAMPLE NOTICE OF RESIGNATION

Partnership Act, 1891- 1975

Notice of Discontinuance of Partnership

Take notice that as from 3 April 2011 the partnership of John Citizen of 100 Rose Terrace Adelaide 5000 and Mary Citizen of 100 Rose Terrace Adelaide 5000 in the State of South Australia who traded as Citizen Fabricators was dissolved.

John Citizen has retired from the partnership.

Mary Citizen will continue to operate the business under the name of Citizen Fabricators and shall be responsible for all the debts and liabilities thereof.

Dated 3 April 2011

Mary Citizen

John Citizen

Resignation of a director

A director should resign by written notice. That can be effective immediately. The company must register the notice of resignation at the Australian Securities and Investments Commission within fourteen days or it commits an offence [Corporations Act 2001 (Cth) s 205B]. This notice should be signed by the resigning director.

A director who resigns is still liable for any guarantee signed as a director (director's guarantee). These documents are enforceable as contracts and are still enforceable against guarantors who are no longer directors. It is only because they are usually signed by company directors that they are called 'director's guarantees'.

A director remains personally responsible for any liability under the Corporations Act 2001 (Cth) which was incurred by the company while that director was still acting as a director, see Criminal offences. However, that director is not responsible for any liabilities incurred after the resignation.

    Changing owners of a business  :  Last Revised: Mon Aug 30th 2010
    The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.