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Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:


CALL: (03) 8561 3318

If you’re buying or selling a business in Victoria you may have been asked about or heard the term ‘Section 52 Statement’.

In this article we answer your questions:

  • What is a Section 52 statement?
  • Who prepares the Section 52?
  • When is a Section 52 required?
  • What information does a Section 52 contain? and
  • What happens if it’s not provided or is false or inaccurate?

What is a Section 52 Statement?

A Section 52 is a small business disclosure statement in the form prescribed in Form 2 of Schedule 1 of the Estate Agents (General, Accounts and Audit) Regulations 2018. Its formal title is ‘Statement by a Vendor of small business.’ The current version (updated in August 2018) can be downloaded for free here - Statement by a vendor of small business.

Who prepares the Section 52?

The Section 52 is usually prepared by the seller’s accountant with assistance from the owner/seller and their lawyer.

When is a Section 52 required?

A Section 52 statement is required for the sale of a small business in Victoria at a price up to $450,000.00 (as at May 2020). The goodwill, plant and equipment, and fittings of the business are used to calculate this price. This means $450,000.00 does not include the stock and intellectual property of the business.

The only exception is if your business holds an active licence or permit under the Liquor Control Reform Act 1998. This means that bars, clubs and restaurants with active liquor licences are exempt from providing a Section 52.

What information does a Section 52 contain?

The Section 52 statement provides a due diligence guide for a buyer/purchaser 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.

The vendor's Business Operating Report is particularity important as it must show information for the current accounting period, information about the previous 2 accounting periods (unless the business hasn't existed that long), and be certified by a practising accountant.

What happens if it is not provided or is false or inaccurate?

If the statement is false or inaccurate or the Section 52 is not provided to the purchaser before they sign a sale of business agreement or pay a deposit then the purchaser has the right to avoid the contract within 3 months of signing. Avoiding means all of the purchaser's money and deposit are refunded and the contract is at an end.

This right to avoid is only available where the purchaser hasn’t already taken over the business and settled the sale.

There can also be penalties awarded for failing to provide the statement and a purchaser may need to commence court proceedings to enforce these rights.

Buying or selling a Small Business?

Make sure you get the right advice to ensure your transaction goes smoothly. Get in touch with us and our team of experienced Commercial Lawyers on 1300 205 506.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by one of our lawyers

,

.

Dan Saunders

For further information contact

Dan Saunders

Dan is a Legal Practitioner at Sharrock Pitman Legal.

He deals with areas of Charities & Not for Profit Law and Commercial Law. For further information, contact Dan on his direct line (03) 8561 3325.

More on

Commercial Law

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be placed on the Supreme Court website for at least 14 days prior to any application.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself does not take long to process the application (maybe another 1 to 2 weeks) and this is done 'on the papers'. This means you do not have to go to a court hearing. There is also a general discretion for the Court to issue a 'Requisition' asking that you provide more information before they process the application and this can delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

  • Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
  • There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
  • There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.
  • You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
  • It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE: 
(03) 8561 3318

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About Sharrock Pitman Legal

For fifty years Sharrock Pitman Legal has made a significant and long term contribution to meeting the legal needs of business owners and residents in the City of Monash and greater Melbourne area.