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VIC Provisions of Ending Business Partnership under Commercial Law ?

Discussion in 'Commercial Law Forum' started by Brian007, 13 September 2015.

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  1. Brian007

    Brian007 Member

    13 September 2015
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    I have a business relationship with a person I shall refer to as Mr S. This arrangement involves us being the joint, and sole, shareholders (and owners) of one private company (Company A); and us being the majority shareholders in a second private company (Company B), which has 15 other shareholders.

    We want to end our business relationship completely. I've seen a lawyer and a Deed of Settlement is being prepared. We have agreed to end our business relationship on the following basis:

    1. Mr S transfers all of his shares in Company A to me.
    2. I transfer all my shares in Company B to Mr Smith.

    What I need to know is:
    (a) Will Capital gains Tax (and/or GST) be a factor in this transaction, and are we obliged by commercial law to place a value on the shares, even though we have agreed to an equitable division of the shareholdings as a means of ending our business relationship? Is there a provision within commercial law for ending business relationships on this basis, where the business partners agree to carve up their interests in the businesses (in this case, the shares), where the matter doesn't have to go before the Federal Court?
    (b) In regards to my disposing of my shares in Company B (by transferring them to my business partner), am I required by commercial law to also offer the other shareholders the opportunity to buy them?

    Any replies would be greatly appreciated. To date this matter has cost me a heck of a lot of money to get to the point where we have agreed to do a share swap, but if I now start a new process of getting additional legal advice on share transfer and Capital Gains Tax, it is going to end up costing me a small fortune.

    Thank you
  2. Amanda E

    Amanda E Well-Known Member

    9 April 2014
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    You should really speak with the lawyer who you've engaged to prepare the deed of settlement and / or your accountant re CGT - it shouldn't take them too long when they're already familiar with the transaction. Ask for a quote.

    Regarding disposing of your shares, check your company constitution and shareholders agreement, if you have them, regarding any restrictions or rights of first refusal relating to disposing of shares.

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