Buying Out a Business Partner: Who Buys and Who Borrows
Business Owners Finance Hub
Business partner buyout / Share buy-back / Funding the exit
Three of the panels that answer this question tell you the company can pay for its own buyout. None of them names the restrictions that decide whether it lawfully can, what happens when there is no shareholders agreement, or why the departing owner's guarantees usually cannot be released without a refinance. This page does, and then says what the whole thing costs in time and money.
Quick Answer
Decide who owns the shares afterwards and whose balance sheet carries the debt, because that choice sets what a lender can secure. You can buy them yourself, or the company can buy them back under the statutory buy-back procedure, and the funding follows from which.
Start where you actually are
- They have offered to sell and you have no idea what it costs. Start at why the price is not the lender's number, then what it costs on top of the price.
- You have a price and no way to fund it. Start at who should borrow, then what a lender takes as security.
- You have looked for the shareholders agreement and there isn't one. Go to what happens when there is no shareholders agreement.
- Your accountant has said the words financial assistance. Go straight to whether the company can buy the shares back.
- They will not sell, or a clause has been triggered and a clock is running. Go straight to what happens when a co-owner will not sell.
- Your co-owner has died, or is too unwell to keep working. Go to buying out after a death, illness or incapacity.
- They want their name off the guarantees before they will sign. Go to releasing the departing owner's guarantees.
- You are the one leaving, not the one buying. Go to what to do if you are the one leaving.
Also called: buying out a business partner, buying out a co-owner, business partner buyout, buying out a co-owner's share of the business.
Who is buying when one business partner buys out another?
The buyer is already inside the business, so the lender is reading a history it can already see, and the question that decides everything else is who ends up owning the debt. That is the difference between this deal and every other deal that gets called the same thing. An outside buyer arrives with a business plan. A continuing owner arrives with the last several years of the business's own bank statements, tax returns and management accounts, and their own name already on most of them.
There are three routes to the same outcome, and they are not interchangeable. You buy the shares personally, or through an entity you control, and the debt sits with you. The company buys them back and cancels them, and the debt sits on the company's balance sheet. Or a new investor comes in, funds the departing shareholder out, and takes their place on the register. Each one leaves a different party owing the money, a different security position, and a different set of legal steps that either are or are not available to you.
The thing that is genuinely in your favour is the operating record. A credit team assessing an external buyer is assessing a forecast. A credit team assessing a continuing owner is assessing performance it can already see, with the buyer's own conduct inside it: how the business trades through a slow quarter, whether the tax lodgements are current, how the account behaves at the end of the month. That is the strongest thing an insider brings to a credit assessment, and it is worth more than a polished projection.
What it does not do is answer the ownership question for you. Before anything else is decided, work out who is to own the shares afterwards, whose balance sheet is to carry the debt, and what the lender can take as security once it is done. Get that wrong and the rest of the transaction has to be unpicked, which is expensive and slow.
Five different transactions get described in the same words. Only the first one is this page.
| Who is buying | Who ends up owing the debt | What changes for the funding | Where to go instead |
|---|---|---|---|
| One co-owner buying another co-owner | The continuing owner, or the company itself, depending on the route chosen | The buyer's operating record is already inside the business, so the lender assesses performance rather than a forecast | This page |
| A salaried management team buying from the owner | The management team, usually through a newly formed acquiring entity | The buyers have no existing equity and the entity has no trading history of its own, so the security and equity questions change shape. A management buyout also engages the financial assistance restrictions more often | Management buyout funding |
| A family succession, where the next generation takes over | The incoming family members, or the family entity that holds the business | Price is often set inside the family rather than by the market, and the retiring generation frequently carries part of it, which changes what a lender is asked to fund | Family succession funding |
| An outside buyer coming in | The buyer, through whatever entity acquires the business | No operating history inside the business, so the assessment runs on the target's numbers plus the buyer's own background, and goodwill is a larger part of the question | Borrowing to buy a business |
| A separation between spouses or de facto partners where a business is among the assets | Depends entirely on the property settlement, not on a commercial negotiation | This is family law, not business acquisition funding. The business interest is one asset inside a settlement, and the order in which things must happen is set by that process | Your solicitor and your accountant, first |
The consolidation table. Only the first row is the transaction this page covers.
If your situation is one of the other four rows, follow the link in the last column. The rest of this page assumes you and the person selling are both already owners of the same trading business, and that what is changing hands is the business interest. The premises are a separate transaction with its own funding, its own security and its own duty treatment, and they are out of scope here.
Is it a company, a partnership or a trust?
It matters more than almost anything else on this page, because the words people use are looser than the structures underneath them. Most Australians who say business partner own shares in a proprietary limited company and are not in a partnership at all. Some genuinely are in a partnership. Some hold units in a trust. And some are describing an arrangement that gives the other person no legal interest in the business whatsoever.
Work out which one you are in before you read another word about buy-backs, because a share buy-back does not exist outside a company, and duty, documentation and the exit steps all change with the structure.
| The structure | What actually changes hands | Is a buy-back available | What to watch on the funding |
|---|---|---|---|
| A proprietary limited company, and you each hold shares | Shares in the company | Yes, as a selective buy-back, if the constitution permits it and the procedure is followed | This is the page's main case. Landholder duty can apply where the company holds land, and the share structure change is notified to the regulator |
| A partnership at general law, with a partnership deed or nothing at all | The partnership interest, not shares | No. There are no shares and no buy-back procedure. The deed, and partnership law, govern | Duty can apply on acquiring a partnership interest where the partnership holds land, on a different basis from landholder duty. Ask your accountant before you agree a price |
| A unit trust, usually with a corporate trustee | Units in the trust, and sometimes shares in the trustee company as well | No buy-back. The trust deed governs whether and how units are redeemed or transferred | Two things can need transferring, the units and the trustee shares, and a lender will want both resolved. Duty treatment differs again by jurisdiction |
| A discretionary trust, again usually with a corporate trustee | Not a fixed interest, because there usually is not one. What changes hands is control: the trustee and the appointor | Not applicable | There may be no identifiable interest to value or to buy, which makes the price a negotiation about control rather than about a percentage. This is solicitor and accountant ground before it is broker ground |
| A "silent partner" with no shares, units or partnership interest | Possibly nothing. It may be a loan, a profit share, an employment arrangement or a handshake | Not applicable | Check what they actually hold before you agree to buy anything. If it is a loan, you are repaying a debt rather than acquiring an interest, and that is a very different funding request |
Get this row right first. Everything below assumes a company with shares unless it says otherwise.
For a business partner buyout, should you borrow or should the company borrow?
It depends on who is to own the shares afterwards and whose balance sheet is to carry the debt, and the answer changes what a lender can take as security. There is no default. The route that is cheapest to arrange is often not the route that leaves the security package a lender can actually work with, and one of the routes is not lawfully available to every company.
Think of it as three separate questions that people tend to collapse into one. Who holds the shares when it is finished. Who is the borrower on the facility. What the lender registers, and against whom. A transaction where you own the shares personally but the company services the debt is a different credit risk from one where the company owns the debt and the shares are cancelled, even though the cash moves the same way on the day.
The comparison below adds the two columns that the published versions of this comparison leave out: whose guarantee survives the transaction, and whether the route is lawfully available at all. That second column is the one that sends people to their accountant, because it is where the structure of the transaction stops being a preference and starts being a legal question.
| The route | Who owns the shares afterwards | Who owes the debt | What a lender secures | Whose guarantee survives | Is the route lawfully available |
|---|---|---|---|---|---|
| You borrow personally and buy the shares | You, in your own name | You | A general security agreement over the trading company, security over the shares acquired, and guarantees | Yours continues. The departing owner's guarantees are unaffected by the transfer and need separate release | Yes, subject only to the shareholders agreement and any pre-emptive rights process |
| A holding entity you control borrows and buys the shares | Your holding entity | The holding entity, with you behind it | Security over the trading company and over the shares in it, plus a guarantee from you and often from the holding entity | Yours continues, through the entity and personally. The departing owner's still need separate release | Yes, though the lender will look at whether the trading company can support debt held one level up |
| The company borrows and buys the shares back, cancelling them | Nobody. The shares are cancelled and the remaining holdings become the whole of the issued capital | The company | A general security agreement over the company's own assets, plus guarantees from the continuing owners | The continuing owners' guarantees continue and usually expand to cover the new facility | Only if the buy-back procedure is followed and the constitution does not preclude it. See the next section |
| The company borrows and applies its money or assets to help you acquire the shares | You, or your entity | The company, with the benefit flowing to you | As for a company borrowing, but the arrangement itself needs to be examined before it is documented | The continuing owners' guarantees continue | Only where the financial assistance restrictions are addressed. This is a legal question, not a funding preference |
| A new investor funds the purchase and takes the departing holding | The new investor, alongside you | Nobody new, if the investor pays cash for the shares | Nothing new is necessarily secured, but existing facilities may have change of control provisions | Yours continues. The incoming investor may or may not be asked for one | Yes, subject to the shareholders agreement and any pre-emptive rights the existing holders have |
| The departing owner carries part of the price | You, on completion, with the balance owing to the seller | You, to the seller, and to any lender funding the cash component | Whatever the funding lender takes, with the seller's position usually ranking behind it | Yours continues. The seller often wants their own guarantees released as a condition of carrying the balance | Yes, and it is common on co-owner exits because the seller knows the business |
The last two columns are the ones the published comparisons leave out.
Two of those rows carry a legal gate rather than a commercial one. Where the company buys the shares back and cancels them, the buy-back procedure applies, and that is the next section. Where the company's own money or assets are used to help someone else acquire its shares, a different and separate set of restrictions applies. Neither is a reason not to do the deal. Both are reasons to decide the structure before you agree the price, rather than after.
On the funding side, a continuing owner buying in is a mainstream business lending request, not an exotic one. What varies is the security package and the covenant set, and both of those follow from the row you pick here.
Can the company buy your business partner's shares back instead?
Yes, through a selective share buy-back, but only if the buy-back does not materially prejudice the company's ability to pay its creditors and the company follows the statutory procedure. This is the route the panels tell people about and the one they explain least well, so it is worth walking through in the order the steps actually happen.
Check the constitution first. Before anything else, read the company's own constitution. It may preclude the company buying back its own shares outright, or impose restrictions on the exercise of that power. If it does, the rest of the procedure does not save you, and the question becomes whether the constitution can be changed and whether the departing owner's cooperation is needed to change it.
Corporations Act 2001 (Cth) s 257A, Note 1: a constitution may include provisions that "preclude the company buying back its own shares or impose restrictions". Read on AustLII, 8 September 2026.
Then the power and its condition. A company may buy back its own shares if the buy-back "does not materially prejudice the company's ability to pay its creditors" and the company follows the procedures laid down in the relevant Division. That is the gate. Note what it is not: there is no signed solvency declaration for a buy-back. The test is the material-prejudice condition on the company's power, not a document somebody signs. This is widely stated the other way, including in material that otherwise reads as authoritative.
Corporations Act 2001 (Cth) s 257A. Read on AustLII, 8 September 2026.
A selective buy-back is an offer to only some shareholders. That is exactly the shape of a co-owner exit: one person's shares are bought back and cancelled, everyone else's are untouched. Because not all shareholders are treated the same way, it needs a higher approval than an ordinary resolution.
the Australian Securities and Investments Commission, "Company share buy-backs": "A selective buy-back is when a company offers to buy back shares from only some shareholders." Read live, 8 September 2026.
The resolution, and the correction that matters. The terms of the buy-back agreement must be approved before it is entered into, by either a special resolution passed at a general meeting "with no votes being cast in favour of the resolution by any person whose shares are proposed to be bought back or by their associates", or a resolution agreed to at a general meeting by all ordinary shareholders. Read that carefully. The departing shareholder is not barred from voting. The bar is on votes cast in favour by them or their associates. The plain-English versions of this rule, including the regulator's own summary page, describe it as the selling shareholders not being allowed to vote at all. The section says something narrower, and the difference can matter in a small company where the numbers are tight.
Corporations Act 2001 (Cth) s 257D, subsections (1)(a) and (1)(b). Read on AustLII, 8 September 2026. Note that the Australian Securities and Investments Commission summarises the same rule as the selling shareholders not being allowed to vote; the section text is the narrower and correct statement.
The agreement can be signed conditionally. This is the sentence that makes the timetable workable and almost nobody quotes it. The terms must be approved before the agreement is entered into, "or the agreement must be conditional on such an approval". In practice that means you do not have to run a general meeting before anybody will sign anything. The parties can document the deal, conditional on the approval, and then run the approval.
Corporations Act 2001 (Cth) s 257D, subsection (1). Read on AustLII, 8 September 2026.
The information statement. The company must include with the notice of the meeting "a statement setting out all information known to the company that is material to the decision how to vote on the resolution". There is a carve-out where the company has previously disclosed the information to its shareholders and it would be unreasonable to require disclosure again.
Corporations Act 2001 (Cth) s 257D, subsection (2). Read on AustLII, 8 September 2026.
The lodgements, and there are two clocks. Before the notice of the meeting is sent to shareholders, the company must lodge with the Australian Securities and Investments Commission a copy of the notice and any document relating to the buy-back that will accompany it. Separately, that commission states it must be told at least fourteen days before a resolution is passed or a buy-back agreement is entered into, using its prescribed notification form, Form 280. It also states that where the share structure changes because shares are cancelled, the change is notified within twenty-eight days after the cancellation. The commission has power to exempt a company from the selective buy-back section, in writing, granted before the buy-back agreement is entered into and possibly subject to conditions.
Corporations Act 2001 (Cth) s 257D, subsections (3) and (4), and the Australian Securities and Investments Commission, "Company share buy-backs". Read 8 September 2026.
On the ten in twelve limit. Stricter rules apply where a company wants to buy back more than a tenth of its shares within a twelve month period, which is commonly called the ten twelve limit. The Australian Securities and Investments Commission states plainly that this limit does not apply to selective buy-backs, which is the type of buy-back a co-owner exit uses. It is worth knowing the rule exists, and worth knowing it is usually not your rule.
The buy-back, from the Corporations Act 2001, read 8 September 2026
- s 257AA company may buy back its own shares only if the buy-back "does not materially prejudice the company's ability to pay its creditors" and the company follows the procedures laid down in the Division. Corporations Act 2001 (Cth) s 257A, read verbatim on AustLII 8 September 2026.
- s 257D(1)(a)The terms must be approved by a special resolution "with no votes being cast in favour of the resolution by any person whose shares are proposed to be bought back or by their associates". The seller is not barred from voting; the bar is on votes in favour. Corporations Act 2001 (Cth) s 257D, read verbatim on AustLII 8 September 2026.
- s 257D(1)The approval must come before the agreement is entered into, "or the agreement must be conditional on such an approval". That alternative is what lets the documents and the approval run in parallel. Corporations Act 2001 (Cth) s 257D, read verbatim on AustLII 8 September 2026.
- s 257D(3)"Before the notice of the meeting is sent to shareholders", the company must lodge with the Australian Securities and Investments Commission a copy of the notice and any document that will accompany it. Corporations Act 2001 (Cth) s 257D, read verbatim on AustLII 8 September 2026.
Statutory text read in full on AustLII on 8 September 2026. These are the provisions, not advice on how they apply to your company. Confirm the procedure with your solicitor before any resolution is put.
Where the company's money helps someone else buy the shares, that is a different question. If the company's own funds or assets are used to help a person acquire shares in the company, the financial assistance restrictions in the Corporations Act are engaged. That is separate from the buy-back procedure, it has its own approval and lodgement mechanics, and it is dealt with in depth on the management buyout funding guide. Raise it with your accountant and your solicitor as soon as the structure looks like it might touch company money.
And the directors' duty runs underneath all of it. Company directors must make sure the company does not trade while insolvent, which means ensuring a buy-back does not cause the company to become insolvent. Where it does, directors may be personally liable for the loss, and a liquidator may be able to recover compensation from the selling shareholders. That is the reason a lender funding a buy-back asks about the company's creditor position rather than only its earnings.
the Australian Securities and Investments Commission, "Company share buy-backs": directors "must make sure their company does not trade while insolvent". Read live, 8 September 2026.
| The step | The source | The period | What it stops if missed |
|---|---|---|---|
| Check the constitution before anything else | Corporations Act 2001 (Cth) s 257A, Note 1 | No period. It is a precondition | A constitution can preclude a buy-back outright or restrict the power. If it does, the procedure cannot cure it |
| Approve the terms of the buy-back agreement by special resolution, with no votes cast in favour by the seller or their associates | Corporations Act 2001 (Cth) s 257D(1)(a) | Before the agreement is entered into | Without the approval, or with the wrong votes counted in favour, the approval is not the approval the section requires |
| Or, alternatively, a resolution agreed to at a general meeting by all ordinary shareholders | Corporations Act 2001 (Cth) s 257D(1)(b) | Before the agreement is entered into | This is the unanimous route. It is faster where everybody is on side and unavailable where anybody is not |
| Sign the agreement conditional on the approval, rather than waiting for it | Corporations Act 2001 (Cth) s 257D(1) | The condition replaces the prior approval, so the sequence can run in parallel | Nothing is lost by not using it, but a great deal of time is. This is the sentence that makes the timetable workable |
| Include with the notice of meeting a statement of all material information known to the company | Corporations Act 2001 (Cth) s 257D(2) | With the notice of the meeting | Shareholders are asked to vote without the information the section says they are entitled to |
| Lodge the notice of meeting and the accompanying buy-back documents with the Australian Securities and Investments Commission | Corporations Act 2001 (Cth) s 257D(3) | Before the notice is sent to shareholders. No period is stated | The notice goes out before the public record does, which is the opposite of what the section requires |
| Lodge the prescribed notification form, Form 280, with that commission | The Australian Securities and Investments Commission, Company share buy-backs | At least fourteen days before the resolution is passed or the agreement is entered into | The commission states a further form, Form 281, is needed where the company wants a shorter gap |
| Notify the change in share structure after the shares are cancelled | The Australian Securities and Investments Commission, Company share buy-backs | Within twenty-eight days after the cancellation | The register still shows the departing owner's shares on issue, which surfaces at the next financing or the next audit |
Every row here is a primary source: the Act itself, or the regulator's own guidance. Read 8 September 2026.
What security can a lender take for a partner buyout if you own no property?
The business itself, through a general security agreement and registrations over its assets, supported by personal guarantees from the continuing owners. When there is no property in the picture, that is the whole security package, and it is worth understanding what each part of it does before you are asked to sign it.
The general security agreement is the instrument. It gives the lender a security interest over the assets of the business, present and future, rather than over one identified item. On a co-owner exit it usually sits over the trading company, and where a holding entity is doing the borrowing it can sit over both.
The registration is what makes it visible and enforceable against the world. The security interest is registered on the Personal Property Securities Register, and the registration is what a later financier searches when it is deciding whether to lend against the same assets. This matters in both directions on a partner buyout: the incoming lender registers, and the departing owner's registrations have to come off. That second half is dealt with further down this page and it is the part most often left undone.
Security over the shares in the acquiring entity is common where you are buying personally or through a holding company. It gives the lender a route to the equity itself rather than only to the trading assets underneath it.
Directors' guarantees from the continuing owners are close to standard on this kind of facility, and they are usually the part people think least about at signing and most about afterwards. A guarantee is not released because a facility is repaid, and it is not released because somebody resigns as a director. Getting out of one is a separate exercise with its own steps, covered on the guide to releasing a personal guarantee. We are not going to duplicate it here; read it before you sign, not after.
The practical point is that this package is assembled from the business you already run. Nothing in it depends on you owning a house. What it does depend on is the business having assets with recoverable value, a clean registration position, and an owner group the lender is willing to take guarantees from.
What makes this straightforward for a lender
- The buyer's operating history is already inside the business's own numbers
- The earnings are not walking out the door, because the person staying is the person who has been running it
- The security position is already understood, and often already registered to the incumbent financier
- The departing owner's obligations were identified early, so nothing surfaces in the final fortnight
What makes it hard
- There is no property to offer, so the whole package rests on the business and the guarantees
- The price was set by a document rather than by a valuation the lender accepts
- The departing owner's guarantees and registrations were left to the end
- The structure was decided after the price, so the funding has to fit a shape nobody chose for funding reasons
What does the lender need to know about the business partner who is leaving?
The lender needs to know whether the earnings survive the person leaving. Map the departing owner's role across key customers, sales, quoting, technical delivery, licences or accreditations, staff management and banking authority, then show who takes over each function and what happens to revenue during the handover. A partner buyout is easier to credit when the ownership changes but the earning capacity does not.
The pattern in the right hand column above is the one we see most often, and it is almost always a sequencing problem rather than a credit problem. Price first, structure later, obligations discovered last, and the departing owner's actual role never mapped. Reverse the order and most of these stop being surprises.
Why will a lender not lend the price you agreed?
Because the price comes from your agreement or your accountant and the lender lends against its own assessment of what the business earns, so the two can differ and the gap is yours to fund. This surprises people more than any other part of the transaction, because the price feels settled by the time a lender is asked to look at it.
Where the price actually comes from. Usually one of three places. A mechanism in the shareholders agreement, which may be a formula, a multiple, or a process for appointing a valuer. An independent valuation commissioned for the purpose. Or a negotiation between two people who have worked together for years and have their own view of what the business is worth. Only the second of those is built to be defended to a third party, and even then the valuer's brief and the lender's credit policy are not the same document.
Why a lender's number can be lower. A credit team is not valuing the business. It is working out what the business can service, and what could be recovered if it stopped. Goodwill is the usual gap: a price that pays for the relationships, the book and the reputation is paying for something a lender cannot register or sell. Who funds that portion, and on what terms, is its own question, and it is answered at length on the goodwill funding guide.
What to do when they differ. The gap has to come from somewhere, and there are only a few places. Cash you already hold. A staged purchase, which brings its own duty consequence and is dealt with further down this page. Vendor finance from the departing owner, which is common on co-owner exits precisely because the seller knows the business and is often willing to carry part of the price, and which has its own facility structure behind it. A staged exit, where the departing owner sells down over time rather than all at once, is a variation on the same idea and is set out in the partial sale and succession explainer. Or a second layer of funding on different terms, which is where private and specialist lending sometimes sits. Each of those changes the credit picture, so it is better raised at the start than produced as a surprise near settlement.
How much of the price do you have to put in yourself?
Nobody in Australia publishes an answer, and we went looking properly rather than assuming. This is the question that comes up first on every one of these deals, and the figures that circulate on it all come from the same place: firms that write the loans.
We searched for a published Australian position on the deposit, equity contribution, loan to valuation ratio or debt service cover expected on a co-owner buyout, naming eight bodies explicitly. What came back is set out below. In short: the prudential material that exists is addressed to lenders about their own risk management, and most of it is about residential mortgages. One of the few instruments that surfaced at all is a listed-entity takeover instrument, which is not this transaction. Not one body publishes anything a borrower can plan against.
| The body | What we found | Does it answer a borrower's question |
|---|---|---|
| The Australian Prudential Regulation Authority | Prudential guidance and standards on lending, including a practice guide on residential mortgage lending, a commercial property practice guide, a credit risk management standard and a letter to authorised deposit-taking institutions on commercial property lending | No. All of it is addressed to the lender about its own risk management, and the most detailed of it is residential. A practice guide of this kind does not itself create enforceable requirements |
| The Australian Securities and Investments Commission | Its company share buy-back guidance, a page on disputes about commercial loans, and material on unfair contract terms in small business lending | No. Procedure and conduct, no lending ratios |
| The Australian Taxation Office | Tax rulings and a draft practice guideline. Nothing on lender expectations | No, and it would be the wrong body to ask |
| The Australian Banking Association | The Banking Code of Practice and nothing else on point | No. Conduct standards, not credit parameters |
| The Australian Finance Industry Association | Nothing at all on this question | No |
| The Australian Small Business and Family Enterprise Ombudsman | A business funding guide, produced jointly with a commercial lender rather than independently | No, and the joint authorship is worth knowing before treating it as an independent position |
| The Reserve Bank of Australia and the Productivity Commission | Research publications on private equity and on business finance generally | No. Market-level research, not transaction guidance |
| The Takeovers Panel | A guidance note that surfaced on this search | No, and this is the trap. That guidance concerns listed entities and takeovers. It is not about a private company with two shareholders |
Eight bodies named and searched. The absence is the finding, and it is why this page prints no figure.
So where do the numbers online come from? Brokers and lenders, writing about their own products. Every deposit percentage, loan to valuation band and debt service cover ratio we could trace on this transaction was published by a firm that writes the loans, with no Australian regulatory or industry source behind it. Some of it is careful. None of it is something you can hold anybody to.
Publishing our own band next to that finding would refute the finding, so we do not. What you can do instead is ask your broker what the lenders actually in front of you are doing, on your numbers, this month, and ask them where their figure comes from.
The other thing worth saying plainly: valuation methodology is not our ground. Accountants, the Commonwealth's business information service and the Australian Taxation Office all publish on how a business is valued. This page is about the funding gap that opens up after a price exists.
From our broking, indicative
We are not publishing a buyer contribution band here, and that is a deliberate call rather than a cautious one. The argument of this section is that no defensible published Australian basis exists for that figure on this transaction. Putting our own band next to that argument would refute it. What we can say is qualitative, and it comes from placing these deals.
- A credit team asks a continuing owner things it never asks an external buyer: why the account behaves the way it does in the slow months, what the departing owner actually did in the business day to day, and what changes about the earnings once they stop doing it.
- The order in which a co-owner exit falls over is remarkably consistent. Price agreed first, structure decided last, and the duty and exit obligations discovered in the fortnight before completion.
- The step most often forgotten is the departing owner's guarantees and registered securities. It is forgotten because it happens after the money moves, and everybody has stopped paying attention by then.
- The guarantee release is also the item most likely to enlarge the deal, because a financier that is owed the same money it was owed yesterday rarely has a reason to give up a guarantor, so the release and a refinance tend to arrive together.
- An insider's operating record is the strongest thing they bring to the assessment. It is worth more than any forecast, and it is the reason these deals are usually easier to fund than they feel.
Qualitative only, based on deals we have placed, as at the review date shown at the top of this page. This block deliberately carries no figures, for the reason set out in the section above it. It is not a quote and not an offer. Actual terms depend on lender policy and your circumstances at the time of application. Not financial advice.
What happens when there is no shareholders agreement?
Then nothing compels either of you to sell, there is no formula and no clock, so the price and the timetable are whatever the two of you agree. That is a worse position for leverage and a better one for funding than most people expect, and it is far more common in Australian two-owner companies than the published advice on this topic admits.
Almost every article about buying out a business partner tells you to read your shareholders agreement. A very large number of readers go and look, and find that two people who trusted each other registered a company, took a share each, and never signed anything else. If that is you, here is what actually changes.
There is no mechanism to trigger, so there is nothing to miss. The thing that most often kills a buyout is a period inside a document that nobody can raise money in. A pre-emptive rights process with a short response window, or a shotgun clause with a fixed completion date, sets a clock you either beat or lose. With no document there is no clock, no deemed offer, and no forfeiture. Your timetable is set by how long the work actually takes, which is the subject of the timing section further down.
There is also no price formula, so the price is pure negotiation. Where an agreement sets a multiple, or a valuer appointment process, the number is at least anchored. Without one, you are negotiating against someone's belief about what half the business is worth, and beliefs about that are usually higher than what a business can service. Getting an independent valuation is often worth it purely because it gives the conversation something outside either of your heads to argue about.
Watch for the company being asked to help. Where there is no agreement and no obvious way to fund the price, the idea that surfaces next is almost always that the company should pay for it, or lend you the money, or put its assets behind your borrowing. That is a separate legal question with its own restrictions and its own approval mechanics, and it is dealt with in the buy-back section. Raise it with your accountant and your solicitor before it is written into a deed, not after.
The lender does not care that you have no agreement. This is the part people worry about unnecessarily. A credit team is looking at what the business earns, what can be secured and who is guaranteeing it. The absence of a shareholders agreement is not a credit issue. What it does affect is what you can honestly promise about timing, because you cannot point to a document and say completion is on a fixed date.
What it really changes is the paperwork, and this is the part to take seriously. A shareholders agreement usually carries the exit machinery: how securities are discharged, how guarantees are dealt with, what happens to loan accounts, whether there is a restraint, who pays for what. With no agreement, the sale deed has to create every one of those obligations from nothing. If your solicitor is drafting from a blank page, make sure these four are in it as express, dated obligations rather than assumptions:
- Ending the departing owner's registrations on the Personal Property Securities Register, by a named date, with a consequence if it does not happen.
- Their guarantees: which ones exist, who releases each, what happens if a release is refused, and whether any part of the price is withheld until they are done.
- Their loan accounts: the balance, and whether it is repaid, forgiven, assigned or set off against the price.
- Any restraint, and whether they can approach clients, staff or suppliers.
And whether you can make them sell at all is a question for your solicitor. We are not going to tell you what remedies do or do not exist where a co-owner simply refuses to engage, because that is legal ground and it turns on facts we cannot see. What we can tell you is that the answer is only useful to you if you can fund the outcome, so find out what you could raise first. That is the same point as the next section, and it applies whether or not there is a document.
Fix it on the way out, not later. If you are going to be the sole owner, you do not need a shareholders agreement afterwards. If you are bringing anyone in, whether an investor, a family member or a new working partner, write one at the same time as the sale deed, while a solicitor is already engaged and while you can still remember precisely which part of this was painful.
What if your co-owner will not sell, or a buy-sell clause is triggered?
Whether you can require them to sell is a question for your solicitor and your shareholders agreement, and the part that decides whether you can act on it is whether you can produce the money inside the period that agreement sets. That is the honest division of labour here: the legal answer belongs to your lawyer, and the fundable answer belongs to you and your broker.
Australian law sets no fixed statutory period for this. There is no general rule that gives you a set number of days to respond to a co-owner's offer, or to complete a purchase once a mechanism is triggered. The clock is whatever the document says. If your shareholders agreement or partnership deed contains a buy-sell mechanism, a pre-emptive rights process or a shotgun clause, the periods in that document are the periods, and they were probably drafted years ago by someone who was not thinking about how long finance takes.
A buy-sell clause can oblige you to fund a purchase at a price you named yourself. These go by several names in Australian shareholders agreements, most often a buy-sell provision, sometimes a shotgun clause and occasionally a Russian roulette clause, and they are all the same mechanism. The usual shape is that one party names a price and the other chooses whether to buy or sell at it. It is elegant on paper and brutal in practice, because the party with money can name a price the other party cannot match, and because the party who names the price has to be ready to be the buyer. If you trigger one without knowing what you can raise, you can find yourself contractually committed to a purchase you cannot complete inside the period, which is a worse position than not triggering it.
Being fundable in advance is the practical answer. Not an approval, which will have conditions and an expiry, but knowing before you act: what a lender would advance against this business, what security it would want, whose guarantees it would take, and roughly how long its process runs. That work is not wasted if the clause is never triggered, and it is the difference between a mechanism being a tool and being a trap. It is also the point of an exit strategy existing before anybody wants to exit.
Can you check borrowing capacity before you trigger a buy-sell clause?
Yes, you can usually get an indicative borrowing view before the final sale deed is signed, but it is not unconditional approval. The useful question at this stage is whether the business appears capable of supporting the proposed debt, what security and guarantees a lender is likely to require, and whether the likely finance timetable fits the contractual clock.
Prepare the lender pack before you trigger the mechanism. What a lender asks for varies, and this list is ours rather than anybody's published standard, but a useful starting pack for a partner buyout includes current and historical business financials, recent management accounts and business activity statements where available, a cash flow forecast showing the new debt, a schedule of existing facilities and guarantees, the constitution and shareholders agreement, the relevant exit clause, the proposed price or valuation basis, the buyer's financial position, and a short transition plan showing who replaces the departing owner's customer, sales, technical or licence functions. Add the draft sale deed and payout figures as soon as they exist.
That work is not wasted if the clause is never triggered. It is the difference between using an exit mechanism with a financing plan behind it and discovering, after the clock has started, that the lender needs documents, releases or security you do not yet have.
The day counts circulating on this topic are worth a table of their own, because they are not Australian.
| The figure quoted | Who published it | Which country's law it describes | What the Australian position actually is |
|---|---|---|---|
| A response window of thirty to sixty days, and a completion window of thirty to ninety days | An Ontario law firm | Canada | No Australian statute sets either period. Both figures describe a foreign jurisdiction and neither applies here |
| Anything from less than a month to just a few months | A United States finance encyclopedia | United States | A general observation about another market, not a rule, and not an Australian one |
| No figure, because there is no Australian figure to quote | Not published as a period, because Australian law does not set one | Australia | There is no fixed statutory period. The clock is whatever the shareholders agreement or the partnership deed says, so read the document |
This is a provenance table. It is the only place on this page where a figure from another country appears, and each one is labelled with the country whose law it describes.
Two of those three rows describe another country's law. We have not published a Switchboard figure in the last row because there is no Australian figure to publish: the period is whatever your document says, and the only way to know it is to read your document. If you have not read it recently, that is the first thing to do, before you speak to anybody about money.
What changes when you are no longer on speaking terms?
Four things, and every one of them is a settlement risk rather than a credit risk, which is why lenders ask about the relationship on these deals when they would not otherwise.
The unanimous approval route disappears. If the company is going to buy the shares back, one of the two approval routes is a resolution agreed to at a general meeting by all ordinary shareholders. That route requires the departing owner to turn up and agree. Where they will not, the special resolution route is the only one left, and it has its own arithmetic. Take that to your solicitor early, because it changes the meeting you need to convene.
The register credentials become a real blocker. Only the secured party can end their own registration, because only they hold the token or the access code the register issued them. A departing owner who is angry, unreachable or has simply lost the email cannot be worked around, and the incoming lender will want that position resolved. This is the single most common way a hostile exit stalls after everybody thought it was finished.
The valuation becomes contested rather than agreed. Where relations are poor, both sides commission their own numbers and neither accepts the other's. Budget for that, and consider agreeing the valuer before agreeing anything else.
And the deed has to do more work. Where there is goodwill, obligations after settlement get honoured informally. Where there is not, every one of them needs a date, a named responsible party and a consequence, and it is worth holding part of the price back until the discharges and releases are actually done rather than promised.
What happens if your business partner dies or becomes too unwell to work?
The money to buy their interest may already exist, because business succession arrangements in Australia are commonly funded by life and total and permanent disablement cover, and where that cover is in place a lender is asked only for the gap. Where there is no cover, it becomes an ordinary buyout on a compressed timetable against a party who may not be able to act quickly, which is a different problem from a slow one.
Plenty is published on this, and it is worth saying who publishes it, because it tells you what is missing. Insurers, financial advisers and law firms cover the arrangement thoroughly, and they write about it before the event: why you should have a business succession agreement, how to fund it, who should own the policies. That material is good and you should read it. What almost none of it does is answer the question you are actually asking if you are reading this after the event, which is what happens when the cover falls short. So, in order.
First, find out whether there is a funded buy-sell arrangement. Many Australian businesses with more than one owner have a business succession agreement sitting alongside the shareholders agreement, funded by insurance over each owner's life, and often over total and permanent disablement and trauma as well. The policies may be owned by the individuals, by the company, or inside a trust, and the ownership structure changes both who receives the money and how it is treated. Your accountant, the company's financial adviser and the shareholders agreement itself are where you find out. Ask the question in the first week, because it changes the entire funding conversation.
Expect a gap even where there is cover. A sum insured is set at a point in time, against a valuation from that point in time. Businesses grow, and the cover often does not keep up, because reviewing it means another underwriting exercise nobody enjoys. So the common outcome is not that insurance solves it or that it does nothing, but that insurance covers most of the price and the buyer needs funding for the balance plus the transaction costs plus the working capital. That balance is an ordinary business lending request and it is usually a smaller and easier one than the full price would have been.
Can the company use the insurance money to buy the shares back?
Where the company owns the policies, yes, and this is the join that almost nothing in the finance field makes. The proceeds are paid to the company, and the company can then use them to buy back the departing owner's shares and cancel them, which is the selective buy-back set out in the buy-back section above. The insurance answers the funding question. It does not answer the procedural one.
Everything in that section still applies. The constitution has to permit the buy-back. The material-prejudice condition on the company's power still has to be satisfied, which is a live question in a business that has just lost an owner. The approval still has to be obtained, and where the shares are held by an estate rather than by the person you knew, the parties to that approval have changed. The lodgements and the fourteen day notification still run. Insurance money in the company's account does not shorten any of it.
Where the policies are owned individually rather than by the company, it is a different transaction. The proceeds go to the departing owner or their estate, and the shares transfer to you rather than being cancelled. Same money, different route, different tax character, different paperwork. Which structure you have is a question for whoever set the arrangement up, and it needs answering in week one because it decides whether you are looking at a buy-back at all.
Then size the gap, not the price. Once you know what the cover pays and which route the shares take, the funding request is the difference plus the transaction costs plus the working capital, and it is usually a smaller and more straightforward request than the whole price would have been. That is the number to take to a broker.
Where there is no cover, the counterparty changes. You are no longer negotiating with your co-owner. You are negotiating with an estate, and possibly with an executor who cannot deal with the shares until the estate is administered, or with an attorney acting under an enduring power of attorney if the issue is incapacity rather than death. Where a grant of probate is needed before the executor can deal with the shares, that is simply a period nobody can compress, and it should be built into the timetable rather than fought. That is a timing constraint outside everybody's control, and it is a real one. It also often means the person on the other side of the table has no operating knowledge of the business and a duty to get the best price for the beneficiaries, which is a harder negotiation than the one you were expecting, not an easier one.
The business's own position can move at the same time. The departing owner may have been the person who held the key customer relationships, the licence, the technical accreditation or the ticket the work is done under. If the earnings depend on something that left with them, a lender will see it, and the funding question becomes partly a question about whether the business can keep trading in its current shape. Say it out loud early rather than letting it surface in credit.
What we are not going to do here is the tax. The treatment of insurance proceeds, of the buy-out itself, and of the deceased owner's capital gains position, are all specific to the arrangement, the policy ownership and the individual, and they are accountant ground. Get them onto it in the same week you find the policy.
The funding limb, once the insurance position is known, is the same as the rest of this page: decide who borrows, work out what can be secured, and deal with the guarantees, which in this situation the departing owner's family will want dealt with urgently and for entirely understandable reasons.
What does a business partner buyout cost on top of the purchase price?
A share transfer is usually not dutiable, but duty can apply where the business holds land, and the costs that surprise people are duty, the seller's tax position pushing the price up, and the working capital the business needs the day after. Treat all three as part of the funding requirement, because that is how a lender will treat them.
The general position first. Transferring shares in a private company is not, as a rule, a dutiable transaction the way transferring land is. That is where most published explanations stop, and it is where the funding problem starts, because there are three well documented exceptions and a co-owner exit can walk into any of them.
Landholder duty, where the business holds land. Where a company holds land, acquiring an interest in that company can be a relevant acquisition and can attract duty. What counts as a significant interest varies by entity type, and the Victorian thresholds are set out in the source line below. Note what that means on a two owner business: buying out an equal co-owner takes you from a half interest to the whole company, which is on either side of the private company threshold in that state.
the State Revenue Office of Victoria, "Relevant acquisitions", citing sections 3 and 78(1)(a) of the Duties Act 2000 (Vic): a significant interest is "an interest of 20% or more in a private unit trust scheme, 50% or more in a private company or a wholesale unit trust scheme, or 90% or more in a listed company or a public unit trust scheme". Read live, 8 September 2026. Thresholds and treatment differ by jurisdiction. Only Victoria and Western Australia were read live for this page. For any other state or territory, check the position with that jurisdiction's own revenue authority: Revenue New South Wales, the Queensland Revenue Office, and the equivalent authority in South Australia, Tasmania, the Australian Capital Territory and the Northern Territory.
The further interest rule, which is why a staged purchase can be dutiable more than once. This is the one almost nobody in the finance field mentions, and it can change the shape of a deal. Once a person has made a relevant acquisition of a significant interest, a relevant acquisition arises again each time that person, an associated person, or any other person whose interest was aggregated to make up the significant interest, acquires a further interest in the landholder. The revenue authority's own words are that this applies "irrespective of the size or timing of the acquisition of the further interest". If cash flow is the reason you are buying the shares in tranches, that reason has a tax consequence and it needs to be priced into the funding plan before the first tranche, not after it.
the State Revenue Office of Victoria, "Relevant acquisitions", citing sections 3, 78(1)(b) and 87(3) of the Duties Act 2000 (Vic). Read live, 8 September 2026.
Where the business is a partnership rather than a company, the position changes again. Duty can apply on acquiring an interest in a partnership that either owns or has an indirect interest in land in Western Australia. The dutiable value there is worked out on the land and chattels the partnership directly or indirectly owns, and the value of other property such as business assets is not included. The general shape of that rule, that a partnership interest can be dutiable where a share transfer would not be, exists in other jurisdictions too, with their own detail. If your business is a partnership, this is a conversation with your accountant before you agree a price, not after.
the Government of Western Australia, "Duties Fact Sheet: Partnership Acquisitions", first published 1 January 2019, last updated 2 July 2025: duty applies where a person acquires an interest in a partnership that "either owns or has an indirect interest in land in Western Australia". Read live, 8 September 2026.
The clock on the statement and the payment. The State Revenue Office of Victoria states that where a relevant acquisition is made, an acquisition statement must be completed and lodged, and duty paid, "within 30 days of the date of the relevant acquisition". That is a short period measured from the acquisition, not from when somebody gets around to raising it, and it is another reason the duty question belongs at the front of the transaction.
the State Revenue Office of Victoria, "Relevant acquisitions", citing sections 78, 81, 82, 89B and 89C of the Duties Act 2000 (Vic). Read live, 8 September 2026.
The seller's tax position is a pointer, and it pushes the price. The departing owner's capital gains position is theirs, not yours, but it does not stay on their side of the table. A seller who is going to be taxed on the gain will often negotiate on the after tax figure, and the concessions and rollovers that might apply are specific to their circumstances. There is a further wrinkle worth naming: the route you choose can change the seller's tax character, because being bought out by the company under a buy-back is not the same transaction for them as selling their shares to you. That is one more reason the who-borrows decision is not purely a funding decision. Name it as a constraint on the price, route it to the accountants on both sides, and do not calculate anything yourself. The same is true of the share sale against asset sale question, which has tax consequences for both parties and funding consequences for you.
And then the two costs nobody puts in the funding plan. Professional costs, meaning the legal work on the transfer or the buy-back, the accounting advice, and any valuation. And the working capital the business needs the day after completion, which is frequently worse than the day before, because cash has just left the business and the departing owner's loan account may have been repaid out of the same pool. A funding request that covers the price and nothing else leaves the business thin at exactly the wrong moment.
| The item | Who sets it | When it falls due | Where to check |
|---|---|---|---|
| Duty on a share transfer, the general position | The revenue authority of each state and territory | Not usually a dutiable transaction on its own | The revenue authority for the state or territory where the business and any land sit |
| Landholder duty, where the acquisition is a significant interest in a company that holds land | The revenue authority of the jurisdiction where the land is | On the relevant acquisition | The State Revenue Office of Victoria, Relevant acquisitions, for the Victorian thresholds. Other jurisdictions differ and must be checked with their own authority |
| Duty on each further interest, where the purchase is staged | The same revenue authority | On each further acquisition, irrespective of its size or its timing | the State Revenue Office of Victoria, Relevant acquisitions. This is the rule that makes a staged purchase dutiable more than once |
| Duty where the business is a partnership rather than a company | The revenue authority of the jurisdiction where the land is | On the partnership acquisition | the Government of Western Australia, Duties Fact Sheet: Partnership Acquisitions, for the Western Australian position |
| The acquisition statement and the payment that goes with it | The revenue authority | Within thirty days of the relevant acquisition, in Victoria | The State Revenue Office of Victoria, Relevant acquisitions. The period is set by each jurisdiction |
| The seller's capital gains position, which moves the price | The seller's circumstances, and the Australian Taxation Office | On the seller, after the transaction, but negotiated before it | Your accountant and the seller's accountant. This page calculates nothing here |
| Professional costs: legal work on the transfer or buy-back, accounting advice, any valuation | The advisers engaged | Through the transaction, mostly before completion | Get written estimates before you commit to a completion date |
| Repaying or refinancing facilities so guarantees can be released | The financier that holds each guarantee | At or before settlement, because the release is often conditional on it | The guarantee release section. This is the item most often left out of the funding request entirely |
| Working capital the day after completion | The business, and its trading cycle | Immediately after settlement, when cash has just left | Your own cash flow forecast, and the working capital facility that sits behind the acquisition debt |
Thresholds and treatment differ by jurisdiction. Only Victoria and Western Australia were read live for this page.
How do you get your departing business partner off the guarantees?
You ask the party that holds each guarantee to release them, and in practice that party will usually only agree once the facility it guarantees has been repaid or refinanced, which is why a partner buyout so often turns into a refinance of everything. The legal half of this is well documented: Australian law firms and finance sites will tell you plainly that resigning as a director releases nothing, that selling your shares releases nothing, and that each beneficiary has to release the guarantor separately. What none of them do is follow it through to what it does to the size of your loan, and that is the part worth getting in front of in week one.
Start by counting them, because there is almost never just one. Ask your accountant or whoever keeps the company records for a schedule, and expect it to be longer than you think. On a typical trading business the departing owner may have given a guarantee for:
- The main business facility, whether that is a loan, an overdraft or a line of credit.
- Every equipment, vehicle or chattel facility, each of which is usually a separate agreement with a separate financier.
- The premises lease, where the landlord took personal guarantees from both directors, and sometimes a bank guarantee or security deposit sitting behind it.
- Trade credit accounts with suppliers, which frequently carry a personal guarantee in the fine print of the application form nobody kept a copy of.
- Merchant facilities, fuel cards, equipment hire accounts and, in some industries, licensing or bonding arrangements.
Then understand why the release is not automatic. A guarantee is a promise given to a specific party, and only that party can give it up. Nothing in the sale of shares between two people touches it. Resigning as a director does not touch it either, and repaying a facility does not necessarily discharge the guarantee document if the facility is still on foot. The mechanics of getting out of one are set out on the guide to releasing a personal guarantee, which is the page to read before you promise anybody anything.
And here is the commercial reality that changes the size of your funding request. Put yourself on the other side of the desk. A financier is owed the same money today that it was owed yesterday, secured on the same assets, and it currently has two people standing behind it. You are asking it to accept one. It has no obligation to agree and no commercial reason to want to, unless something else improves: the debt reduces, the security improves, or it is repaid and replaced. That is why the answer to "will you release my former co-owner" is so often "yes, on refinance."
So the acquisition and the refinance become one transaction. The funding request is not the price. It is the price, plus whatever has to be repaid so the releases can happen, plus the transaction costs, plus the working capital. That is a materially larger number, and it is much better discovered at the start than in the week before settlement. It is also not necessarily bad news: consolidating a spread of facilities into one structure at the same time as the ownership simplifies is often a sensible thing to be doing anyway.
What to do when a release is refused outright. Sometimes a landlord or a supplier simply will not release a guarantor, and there is no lever. The usual answers are to replace the guarantee with something the party will accept, to substitute a different security, to renegotiate the underlying agreement, or, where none of that works, to deal with it commercially between you and the departing owner through an indemnity in the deed. An indemnity is not a release, it is a promise to cover them if the guarantee is ever called, and the departing owner's solicitor will tell them so. Expect that to be a negotiation about price.
| What the departing owner is still on the hook for | Who has to release it | What it usually takes | What it does to the funding request |
|---|---|---|---|
| A guarantee over the main business facility | The financier holding that facility | Repayment or refinance is the common condition. A release on an unchanged debt is possible but is a concession, not a right | Adds the balance of that facility to what you are asking to borrow |
| Guarantees over equipment, vehicle and chattel facilities | Each financier separately | Each one handled on its own terms and its own timetable. These are the ones most often missed in the count | May add several facilities to a refinance, or leave residual exposure the deed has to deal with |
| A personal guarantee on the premises lease | The landlord, and sometimes the landlord's financier as well | A landlord under no pressure may simply decline, or may want a replacement guarantee, a larger bank guarantee or a deed of variation | Can require cash for a larger security deposit or bank guarantee, which is funding nobody planned for |
| Guarantees inside trade credit and supplier account applications | Each supplier | Usually a new account application in the continuing structure. Cheap and slow, and easy to forget entirely | Little funding impact, real settlement impact if it is discovered late |
| Registered security interests held by the departing owner or their entity | The departing owner, because only they hold the register credentials | They end the registration themselves. Nobody can do it for them | No funding impact, but the incoming lender will want it done or bindingly undertaken before it releases funds |
| Their shareholder or partner loan account | Nobody releases it. It is settled between the parties | Repaid, forgiven, assigned or set off against the price, on the accountants' advice | Where it is repaid in cash, it is a real funding requirement over and above the price |
Count these in week one. This table is the reason a partner buyout funding request is usually bigger than the price.
What has to be cleared before a departing business partner is completely out?
The money changing hands is not the end of it, because the departing owner's guarantees, their registered security interests and their loan accounts all have to be dealt with separately, and a lender will want evidence of it before it settles. That last part is the bit that is missing from the published versions of this, which describe the deed and the discharge sequence and stop there.
The guarantees come first and they have their own section above. The short version for this checklist is that resigning as a director releases nothing, the release comes from the party holding the guarantee, and it is often conditional on a refinance. Everything else here assumes that work has started.
Then the registered security interests, and the credential problem. Where the departing owner, or an entity of theirs, holds a registered security interest over the business's assets, that registration has to be ended. Here is the operational fact that catches people: only the secured party can end their own registration, because only they hold the credentials to do it. Ending a registration requires the registration number and either the registration token, or the secured party group number and access code, which the register emailed to the secured party's address for service when the registration was first created. You cannot do it for them. If relations have soured, or if the departing owner has lost the email, this becomes a real delay at exactly the point everybody expects the transaction to close.
the Personal Property Securities Register, "End a registration": "Ending a registration is final", there is no fee, and it requires the registration number and either the registration token or the secured party group number and access code. Read live, 8 September 2026.
The timing obligations are real, and they carry a consequence. A secured party's registrations should be ended as soon as practicable, generally within five business days after they no longer have a security interest in the collateral. There is a harder rule for serial numbered property and for property used mainly for personal, domestic or household purposes, which must be discharged before the end of five business days after the registration is unperfected. Failing to do it risks breaching legal obligations and can attract a civil penalty. That is worth putting in the deed as an express obligation with a date, rather than leaving it to goodwill after settlement.
Ending the departing owner's registrations, from the Personal Property Securities Register, read 8 September 2026
- 5 business daysRegistrations should be ended as soon as practicable, "generally within 5 business days" after the secured party no longer has a security interest in the collateral. the Personal Property Securities Register, End a registration, read live 8 September 2026.
- 5 business daysSerial numbered property, and property used mainly for personal, domestic or household purposes, must be discharged "before the end of 5 business days after the registration is unperfected". Personal Property Securities Register, End a registration, read live 8 September 2026.
- Final, and credentialled"Ending a registration is final", there is no fee, and it requires the registration number plus either the registration token or the secured party group number and access code. Only the secured party holds those. the Personal Property Securities Register, End a registration, read live 8 September 2026.
- Civil penaltyFailing to end a registration when the security interest has gone risks breaching legal obligations and "can attract a civil penalty". Personal Property Securities Register, End a registration, read live 8 September 2026.
Read live on the register's own guidance page on 8 September 2026. A national law firm publishes a market undertaking of a longer period for lodging a financing change statement; that period is not the registry's, and only the registry's own guidance is adopted here.
The loan accounts. Shareholder or partner loan accounts are the quiet item on this list. Money the departing owner lent the business, or drew from it, sits in the accounts as a balance that has to be repaid, forgiven, assigned or set off against the price. It has a tax character, it has a cash consequence, and it is a question for the accountants on both sides. What it must not be is discovered in the week before completion, because repaying a loan account is a cash requirement over and above the price, and it can be substantial.
The company notifications. The share structure changes when shares are bought back and cancelled, the officeholder position changes when a director resigns, and both have to be notified to the regulator inside their own periods. Where a buy-back has happened, the change in share structure is notified within twenty-eight days after the cancellation.
the Australian Securities and Investments Commission, "Company share buy-backs". Read live, 8 September 2026.
What changes immediately after the partner buyout settles?
The legal transfer may be complete at settlement, but the business is not operationally clean until the departing owner can no longer approve payments, access systems, bind the company or remain attached to obligations that were meant to end. Treat the first business day after settlement as a controlled access and authority change, not as an administrative tidy-up for later.
| What to change or confirm | Why it matters | When to do it | Who usually owns the action |
|---|---|---|---|
| ASIC officeholder, member and share-structure records | The public company record has to match the new ownership and officeholder position. A buy-back also changes the share structure because the bought-back shares are cancelled | The regulator requires an officeholder appointment, resignation or retirement to be notified within twenty-eight days, and a buy-back share-structure change within twenty-eight days after cancellation | The company or its registered agent, with the solicitor or accountant checking the transaction records |
| Bank accounts, payment approvals, cards, merchant access and online banking | A former owner should not retain authority to move money, approve payments or receive security codes after completion | At settlement or immediately after the release mechanics are complete | The continuing owner and the bank or payment provider. Provider rules differ |
| Guarantees, facility authorities and PPSR registrations | Resignation does not release a guarantee, and stale registrations can conflict with the incoming lender's security | Releases should be agreed before settlement; discharges and any removal process should follow the security-ending event without delay | Each guarantee holder, plus the authorised PPSR account user or the person running a removal process |
| Lease, supplier, fuel-card, hire and merchant-account guarantees | These are separate from the main loan and often keep the former owner exposed after the headline finance has been refinanced | Start before settlement and obtain written outcomes as soon as each provider can process them | The continuing owner, the departing owner and each provider separately |
| Insurance and business succession arrangements | The ownership, insured persons, beneficiaries and amount of cover may no longer match the business after one owner leaves | Review immediately after the ownership change, or earlier where policy proceeds are funding the transaction | Your qualified insurance or financial adviser, with tax and legal advice where the ownership structure matters |
| Licences, permits, technical accreditations and key-person functions | If a licence, accreditation or customer relationship sat with the departing person rather than the entity, the business may not be able to trade in exactly the same way after they leave | Identify before credit approval and have the replacement or transition in place by settlement | The continuing owner, the relevant regulator or industry body, and the operational team |
| Passwords, domains, cloud systems, accounting, payroll, CRM and multi-factor authentication | Ownership has changed, so administrator rights and recovery channels should change with it. A former owner retaining access is an operational and data-security risk | On the settlement checklist, with critical access changed the same day | The continuing owner and the business's IT or system administrators |
| Key customer, staff and supplier handover | A lender underwrites the earnings that remain after the co-owner leaves, not the historical earnings generated by somebody who is no longer there | Plan before settlement; execute the communication and handover around completion | The continuing owner, with the departing owner where the deed requires a transition |
the Australian Securities and Investments Commission, "Add or remove a company officeholder": where a company appoints or removes an officeholder it must tell the commission within twenty-eight days, a late fee applies beyond that, and where a directorship ending is reported more than twenty-eight days late the commission records the end date as the date the change was made, not the date the directorship ended. Read live, 8 September 2026. Its share buy-back guidance separately puts the post-buy-back share-structure notification within twenty-eight days after cancellation. Every other row in the table above is a practitioner checklist, not a statutory deadline.
That last point is worth reading twice if you are the one leaving. Notify late and the public record can show you as a director for months after you actually stopped being one. That is not a filing inconvenience, it is a period during which the register says you held the role.
And restraint provisions, as a pointer. Whether the departing owner can start a competing business, approach the clients, or hire the staff is a matter for the deed and for your solicitor. It affects the value of what you have just bought, and lenders sometimes ask about it where the earnings are concentrated in relationships the departing owner owned. It is named here so it is on the list, not explained here, because it is a legal question.
What a lender actually wants to see before it releases funds. This is the part that is worth planning around. Broadly: an executed transfer or a completed buy-back with its resolutions and lodgements in order; evidence that the departing owner's registrations are discharged or that there is a binding, dated undertaking to discharge them at settlement; the position on the departing owner's guarantees, with any release documented; the loan accounts resolved; and a post completion capital position that does not leave the business unable to trade. A transaction that has all of that assembled runs on the lender's normal timetable. A transaction that produces it one item at a time runs on nobody's timetable. We have seen the same version of that story on an accommodation co-owner exit, and the pattern does not change with the industry.
How long does it take to buy out a business partner?
There is no standard length, because no Australian rule sets one, and the timetable is decided by whichever of four things finishes last: agreeing a price, settling the structure, getting the funding approved, and clearing the departing owner's obligations. Only some of those can run at the same time, and the last one is the one with no published period at all.
Anybody who gives you a number for this without asking about your structure, your document and your guarantees is guessing. What can be said precisely is which steps have a published Australian period attached, and which do not, and the honest answer is that the ones without are the ones that decide the date.
Three things you can do in parallel, starting today. Find out what you could raise. Get the schedule of guarantees and registered security interests. Read the constitution and any shareholders agreement. None of those depends on the other side agreeing to anything, none of them costs much, and all three are usually done last.
One thing that has to be serial. The buy-back approval sequence, if that is the route. The lodgement goes in before the notice of meeting goes out, and the regulator's fourteen day notification runs before the resolution is passed. What makes it workable is the conditional-agreement provision covered above: the documents and the approval can run alongside each other instead of one after the other.
| The step | Can it run in parallel | Who controls the pace | The period, and where it comes from |
|---|---|---|---|
| Working out what you could raise | Yes, and it should start first | You and your broker | No published period. Do it before you trigger any mechanism, because it decides whether the rest is worth starting |
| Agreeing a price, or running a valuation | Partly, but the funding cannot be finalised without it | You, the departing owner, and any valuer | No published Australian period. Where a shareholders agreement sets one, that document is the only clock |
| Deciding the structure and drafting the deed | Yes, alongside the price | Your solicitor and accountant | No published period. Deciding this after the price is the most common cause of delay on these deals |
| Notifying the regulator of a buy-back on the prescribed form | No, it gates the resolution | The company | At least fourteen days before the resolution is passed or the agreement is entered into. Source: the Australian Securities and Investments Commission, Company share buy-backs |
| Lodging the notice of meeting and its accompanying documents | No, it precedes the notice going out | The company | Before the notice is sent to shareholders. No period is stated. Source: Corporations Act 2001 (Cth) s 257D(3) |
| Credit assessment and approval | Yes, alongside the approval sequence | The lender | No published period, and it varies with how complete the pack is on the day it goes in |
| Getting the departing owner's guarantees released | Yes, and it should start in week one | Each party holding a guarantee, not you | No period at all, published or otherwise. This is usually the long pole, because the release is often conditional on a refinance |
| Ending the departing owner's registrations | After the security interest ends | The departing owner, because only they hold the credentials | Generally within five business days after the security interest ends. Source: the Personal Property Securities Register, End a registration |
| Notifying the change in share structure after a buy-back | After cancellation | The company | Within twenty-eight days after the cancellation. Source: the Australian Securities and Investments Commission, Company share buy-backs |
| The duty acquisition statement and payment, where landholder duty applies | After the relevant acquisition | You, and the revenue authority | Within thirty days of the relevant acquisition, in Victoria. Other jurisdictions set their own. Source: the State Revenue Office of Victoria, Relevant acquisitions |
Every period in the last column is one this page verified against its primary source on 8 September 2026. Where the cell says no published period, that is the finding, not an omission.
Read the last column downwards and the shape of the problem is obvious. The steps with published periods are the ones a company secretary can diarise. The steps that actually set your completion date, the price, the credit assessment and the guarantee releases, have no periods at all, and two of the three are controlled by somebody other than you. That is the argument for starting the guarantee work in the first week rather than the last.
What should you do if you are selling your share to your business partner?
Four things decide whether your exit actually completes, and three of them can only be done by you: ending your registered security interests, getting your guarantees released, and settling your loan account. The fourth is the price, and the honest constraint there is that the buyer can only pay what the business can service.
Most of what is published on this topic is written for the person buying. If you are the one going, this section is the part of the page to send to your solicitor, and the rest of it is worth reading anyway, because understanding what the buyer is up against is how you get paid.
Your registrations are yours alone to end. If you or an entity of yours holds a registered security interest over the business, nobody can remove it for you. The register issued the credentials to you when the registration was created, and it requires the registration number plus either the registration token or the secured party group number and access code. Find those now, before you need them, because looking for a years-old email in the week of settlement is how exits stall. Note also that the register says ending a registration is final, and that registrations should be ended generally within five business days after the security interest ends.
Make sure your resignation is notified on time. Where the company reports a directorship ending more than twenty-eight days late, the regulator records the end date as the date it was told rather than the date you actually stopped. That is a period in which the public record still shows you as a director of a company you no longer own, so make the notification an express, dated obligation in the deed and check it was lodged. The detail is in what changes immediately after settlement.
Your guarantees will not fall away because you left. Resigning as a director does nothing to them, and neither does selling your shares. Ask for each one to be released in writing, expect the answer to depend on the buyer refinancing, and do not accept an indemnity from the buyer as if it were a release. An indemnity means you are still liable to the financier and are relying on the buyer to cover you. It may be the best available answer, but price it as the risk it is. The guide to releasing a personal guarantee sets out how they actually come off.
Your loan account is cash, not paperwork. If the business owes you money, that is a separate amount from the price and it has to be repaid, forgiven, assigned or set off. It also has its own tax character. Get your accountant onto it early, and do not let it be quietly folded into a headline number without anybody working out what it means for you.
On price, understand the constraint the buyer is under. They are not being difficult when they say they cannot fund your number. A lender is assessing what the business can service and what could be recovered, and goodwill is the part it will not fund. That gives you a genuine choice rather than a disappointment: a lower figure fully paid at settlement, or a higher figure where you carry part of it and are paid over time. Vendor finance is common on co-owner exits precisely because you know the business better than any lender ever will. If you take that route, take advice on where you rank behind the funding lender, and on what security you have if the business struggles.
And be realistic about the mechanism. If your shareholders agreement gives you a right to require the other owner to buy you out, that right is only worth what they can raise. A mechanism the other side cannot fund does not get you your money, it gets you a dispute. Whether they can fund it is a fair question to ask early, and a broker can answer the shape of it without either of you committing to anything.
| What you have to do | When to start | Can anyone do it for you | Why it holds up settlement if you leave it |
|---|---|---|---|
| Find the credentials for every security interest you have registered | Now, before anything is signed | No. Only the secured party holds the registration token or the access code | The buyer's lender will not release funds against assets a former owner still holds a registered interest over |
| List every guarantee you have given, including equipment, lease, supplier and merchant accounts | Week one | Your accountant can help assemble it, but only you know what you signed | A guarantee discovered late is a release that has not been asked for, and releases are the slowest item in the transaction |
| Ask each holder for a written release | As soon as the deal shape is known | No, and the buyer cannot compel it either | The holder may condition the release on the facility being repaid or refinanced, which enlarges the buyer's funding request |
| Agree the treatment of your loan account | Before the price is settled, not after | The accountants on both sides, working together | It is a cash amount over and above the price, and discovering it late can move the whole deal |
| Take advice on your own tax position | Before you agree a number | Your accountant. This page calculates nothing here | An after-tax figure you did not expect is the most common reason a seller reopens an agreed price |
| Decide whether you will carry part of the price | When the buyer's funding gap becomes clear | Your choice, taken with your own advisers | Left to the end it becomes a rescue rather than a negotiated position, and you have less leverage |
Three of these six can only be done by the departing owner. That is why exits stall after everybody thinks the deal is done.
Buying out a co-owner is not one decision, it is five, and they have an order. What structure you are actually in comes first, because a share buy-back does not exist outside a company. Who ends up owning the shares and who ends up owing the debt comes next, because it sets what a lender can secure and whose guarantee survives. Whether the company can lawfully buy the shares back is answered by the constitution and the statutory procedure, not by preference. What it costs beyond the price includes duty that a staged purchase can trigger more than once, the seller's tax position pushing the price up, the working capital the business needs the day after, and the facilities that may have to be refinanced before anyone will release a guarantee. And then getting the departing owner completely out, which means their guarantees, their registrations and their loan accounts, because a lender wants that evidenced before it releases funds. Where you are somewhere in that sequence, the business owners finance hub and the vendor finance page are the two most useful next reads.
Key takeaway: settle who owns the shares and who owes the debt before you settle the price, and count the guarantees in the first week, because both decide how big the funding request really is.Frequently Asked Questions
Yes. A co-owner buying out another co-owner is a mainstream business lending request in Australia, and it is usually assessed on the trading business's own numbers rather than on a forecast, because the buyer's operating record is already inside them. What varies is the security package: with no property in the picture, a lender will normally take a general security agreement over the business, registrations over its assets and guarantees from the continuing owners. The structure question comes first, though, because whether you borrow or the company borrows changes what can be secured. See business lending for owners and, for the wider acquisition picture, borrowing to buy a business.
One co-owner acquires the other's interest in the business, and the departing owner leaves the ownership register. Practically it runs in four parts: agreeing a price, deciding who buys and who borrows, documenting and completing the transfer or the share buy-back, and then unwinding the departing owner's remaining obligations, which means their guarantees, their registered security interests and their loan accounts. The last part is the one most often left half done, and it is the part a lender asks for evidence of before it releases funds. The clean exit checklist is set out further up this page.
A shareholder cannot be forced to sell their shares into a buy-back, because a buy-back is an agreement and nobody can be compelled to enter one. Whether the other shareholders can approve it is a separate question: the Corporations Act 2001 requires the terms of a selective buy-back agreement to be approved before it is entered into, either by a special resolution with no votes cast in favour by the person whose shares are being bought back or their associates, or by a resolution agreed to at a general meeting by all ordinary shareholders. Note the distinction the plain-English summaries lose: the departing shareholder is not barred from voting, the bar is on votes cast in favour. The detail sits in the buy-back section above, and the procedure itself is a question for your solicitor.
The ten twelve rule is that stricter requirements apply where a company wants to buy back more than a tenth of its shares within a twelve month period, which is where the name comes from. For a co-owner exit the more useful fact is the exception: the Australian Securities and Investments Commission states that the ten twelve limit does not apply to selective buy-backs, and a selective buy-back is the type used when one shareholder's holding is bought back and cancelled. So the limit is worth knowing about and usually is not the constraint on this transaction. The constraints that do apply are set out in the buy-back section.
Yes, through a selective buy-back. The Australian Securities and Investments Commission describes a selective buy-back as one where a company offers to buy back shares from only some shareholders, which is exactly the shape of a co-owner exit. Because not all shareholders are treated the same way, it needs either a special resolution with no votes cast in favour by the selling shareholder or their associates, or a resolution agreed to by all ordinary shareholders, and the company's constitution has to be checked first because it can preclude a buy-back altogether. The full sequence, with the source for each step, is in the buy-back section.
Usually not on the share transfer itself, but duty can still apply where the company holds land. That is landholder duty, and it is triggered by acquiring a significant interest in a company that holds land, with the threshold set by each state and territory. In Victoria the State Revenue Office puts a significant interest in a private company at an interest of fifty per cent or more, which is directly relevant on a two owner business. Thresholds and treatment differ by jurisdiction and only Victoria and Western Australia were read live for this page, so check your own jurisdiction with its revenue authority and confirm the position with your accountant. The funding consequences are set out in what it costs on top of the price.
Yes, and the assessment turns on what the business earns, what can be secured, and what you bring to it. Buying into a business you already part own is the easiest version of that question because your conduct is already visible in the trading history. Buying a business you have no involvement in is a different assessment, with goodwill usually the hardest part to fund. Both are covered on the guide to borrowing to buy a business, and the goodwill question specifically on the goodwill funding guide.
Whether and how you can require the other owner to sell is a legal question for your solicitor and for the shareholders agreement or partnership deed, and this page does not answer it. The funding limb is the part we can answer: what decides whether you can act on a mechanism is whether you can produce the money inside the period that document sets, and Australian law sets no fixed period, so the clock is whatever your document says. Where there is no document at all, there is no clock and no mechanism, which is covered in what happens when there is no shareholders agreement. Work out what you could raise before you trigger anything, because a mechanism you cannot fund is worse than one you never used. See also what happens when a co-owner will not sell.
The secured party, meaning the departing owner or their entity, because only they hold the credentials. Ending a registration on the Personal Property Securities Register requires the registration number and either the registration token or the secured party group number and access code, which the register issued to the secured party when the registration was created. You cannot do it on their behalf, and the register states that ending a registration is final. The register also says registrations should be ended as soon as practicable, generally within five business days after the security interest ends, and that failing to do so can attract a civil penalty. Make it an express, dated obligation in the deed. More in the clean exit section.
It depends on who is to own the shares afterwards and whose balance sheet is to carry the debt, and the answer changes what a lender can take as security and whose guarantee survives. Where you borrow, you hold the shares and the debt sits with you. Where the company borrows and buys the shares back, the shares are cancelled and the debt sits on the company, but the buy-back procedure has to be followed and the constitution has to permit it. Where the company's own money helps somebody else acquire its shares, a separate set of restrictions applies. The comparison, including whether each route is lawfully available, is in the borrow or the company section.
Then nothing compels either of you to sell and there is no formula and no clock, so the price and the timetable are whatever the two of you agree. That is worse for leverage and better for funding than most people expect, because the thing that usually breaks a buyout is a document period nobody can raise money inside, and you do not have one. What it does change is the paperwork: the sale deed has to create every obligation a shareholders agreement would normally have inherited, which means the security discharges, the guarantee releases, the loan accounts and any restraint all have to be drafted from scratch and dated. Whether any remedy exists if the other owner simply refuses to engage is a question for your solicitor. See what happens when there is no shareholders agreement.
What happens is set by the shareholders agreement or buy-sell deed if there is one, by the deceased owner's will and their estate if there is not, and by whether any insurance was arranged to fund the purchase. Where a buy-sell arrangement was funded by life or total and permanent disablement cover, the money to buy the interest may already exist, and the funding question narrows to the gap between the sum insured and what the interest is worth now, which is usually a gap because sums insured are set at a past valuation. Where the company owns the policies, the proceeds are paid to the company and the company can use them to buy back the shares and cancel them, but the statutory buy-back procedure still has to be followed in full and the insurance money does not shorten it. Where the policies are owned individually, the proceeds go to the estate and the shares transfer to you instead. Where there is no cover at all, it is an ordinary buyout on a compressed timetable, negotiated with an estate that may be waiting on a grant of probate before it can deal with the shares. See buying out after a death, illness or incapacity, and take the legal and tax limbs to your solicitor and accountant.
There is no standard length, because no Australian rule sets one and the timetable is decided by whichever of four things finishes last: agreeing a price, settling the structure, getting the funding approved, and clearing the departing owner's obligations. Some published periods do exist and they are worth planning around: the Australian Securities and Investments Commission must be notified at least fourteen days before a buy-back resolution is passed or the agreement is entered into, a change in share structure is notified within twenty-eight days after cancellation, a Victorian acquisition statement and its duty are due within thirty days of the relevant acquisition, and security registrations should be ended generally within five business days after the security interest ends. The guarantee releases are the item with no period at all, and they are usually the long pole. See how long it actually takes.
That is a legal question and it belongs with your solicitor, not with a finance broker. What we can tell you is what decides whether the answer is any use to you. If your shareholders agreement or partnership deed contains a buy-sell mechanism, a pre-emptive rights process or a shotgun clause, the period in that document is the period, Australian law does not add one, and a mechanism you cannot fund inside that period is worse than one you never triggered. If there is no document, there is no mechanism to trigger. Either way, work out what you could raise before you act. See what happens when a co-owner will not sell.
Often, yes, and it is the single most under-planned part of a co-owner exit. A guarantee is released by the party that holds it, not by the transaction, and a financier that is owed the same money it was owed yesterday has little commercial reason to give up a guarantor. In practice that means the departing owner's release is frequently conditional on the facility being repaid or refinanced, so the acquisition borrowing and a refinance of the existing facilities become one transaction and one credit request. There is also rarely just one guarantee: equipment and chattel facilities, the premises lease, trade credit accounts and merchant facilities each have their own. Count them in week one. See releasing the departing owner's guarantees.
First separate the two things this question usually means, because most of what is published answers the other one. Dissolving or winding up a partnership means the business stops and the assets and debts are divided. Selling your share to your co-owner means the business keeps trading and only the ownership changes. This answer is the second one. From the exiting side the transaction is the same four steps in the same order, but three of them depend on things only you can do, which is why exits stall. Your registered security interests can only be ended by you, because only you hold the credentials the register issued. Your guarantees are released by the party holding them and that release is often conditional on the buyer refinancing. Your loan account is cash rather than paperwork and has to be repaid, forgiven, assigned or set off against the price. The fourth thing is the price, and the honest constraint is that the buyer can only pay what the business can service, so a higher figure paid over time can net you more than a lower one at settlement. See what to do if you are the one leaving.
No Australian authority publishes a figure, and that is worth knowing before you plan against one you found online. We searched for a published position on the deposit, equity contribution, loan to valuation ratio or debt service cover expected on a co-owner buyout, naming eight bodies including the prudential regulator, the corporate regulator, the tax office, the banking association, the finance industry association and the small business ombudsman. The prudential material that exists is addressed to lenders about their own risk management and most of it concerns residential mortgages, and one instrument that surfaces on this search covers listed-entity takeovers rather than private companies. Every figure in circulation on this transaction traces back to a firm that writes the loans. What actually decides it is what the business can service and what can be secured, so ask your broker what the lenders in front of you are doing this month, and ask them where their number comes from. The full search is in how much of the price you have to put in yourself.
After settlement, make the business match the new ownership in practice as well as on paper. Confirm the officeholder and share records with the regulator, remove the former owner from banking and payment authorities, finish every guarantee release and security discharge, update lease and supplier accounts, review insurance and licences, change administrator access and multi-factor authentication, and complete the key customer and staff handover. The regulator requires an officeholder appointment, resignation or retirement to be notified within twenty-eight days, and a share-structure change after a buy-back within twenty-eight days after cancellation. Notify an officeholder change late and the register records the end date as the date you told them, not the date the role actually ended, which matters most to the person who left. The full day-one checklist is in what changes immediately after settlement.
FBAA Accredited
