If you are buying or selling a business, you may have heard the term “Section 52 Statement”. But what is a Section 52 Statement, and why is it so important?
What is a Section 52 Statement?
A Section 52 Statement is a small business disclosure statement provided by a vendor of a business to a purchaser. The Section 52 Statement is required under the Estate Agents Act 1980 (Vic) for all sales of businesses up to the sale price of $450,000.
What is included in the Section 52 Statement?
The Section 52 Statement must include the following information:
(a) the financial performance of the business for the current accounting period (up to the most
recent quarter);
(b) the financial performance of the business for the previous two accounting periods, unless the
vendor has not owned the business for that long; and
(c) a statement by a practising accountant that the information is in accordance with the books of
account.
Who prepares the Section 52 Statement?
The Section 52 Statement is completed by the vendor and their accountant.
What happens if a Section 52 Statement is not provided to the purchaser?
If the statement is not provided to a purchaser before they sign the Sale of Contract of Business (for a business sale of $450,000 or less), or if the statement is incomplete or inaccurate, then a purchaser may avoid the contract within 3 months of signing (provided the purchaser has not already taken possession of the business).
If a purchaser avoids a contract on these grounds, the vendor must repay any money paid by the purchaser under the contract. A vendor who fails to give a purchaser or their representative this Statement or gives a Statement that is incomplete is also liable for a fine.
Whether you a buying or selling a business, ensure that you are getting the correct advice to ensure your transaction goes smoothly.
Contact our team today.