Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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If you’re getting ready to sell your business, you’ve probably heard the phrase “going concern” thrown around by accountants, brokers, and buyers.
In simple terms, a sale of a business as a going concern usually means you’re selling an operating business that can keep running after settlement - not just a pile of assets.
Done well, a going concern sale can help you achieve a cleaner exit, preserve the value you’ve built, and make the handover far smoother for the buyer. But if the details aren’t documented properly, it can also create disputes about what’s actually included, whether staff transfer, and who carries which liabilities.
Below, we’ll break down what “going concern” means in a New Zealand business sale, the key benefits and risks, what’s typically included, and the legal steps that help you sell with confidence.
What Does “Going Concern” Mean When Selling A Business?
“Going concern” isn’t just a marketing phrase. In a practical sense, it describes a business that is operating and capable of continuing to operate into the future.
When you sell a business as a going concern, the buyer is usually expecting to take over something that’s “ready to run”, such as:
- an established customer base and goodwill
- operational systems and processes
- supplier relationships
- staff (often)
- the right to trade from the premises (where relevant)
- business assets needed to keep operating
From a legal perspective, the key point is this: a going concern sale is less about one technical definition, and more about ensuring your sale documents match what both sides think they’re buying and selling.
Is A “Going Concern” Sale The Same As An Asset Sale Or Share Sale?
Not always. In New Zealand, business sales are commonly structured as either:
- Asset sale: you sell the business assets (and usually goodwill), and the buyer runs the business going forward; or
- Share sale: the buyer buys the shares in the company that owns the business, so the company (and everything in it) continues, just with a new owner.
Both structures can involve a “going concern” business, but they have different risk profiles and legal documents. If a buyer is taking the shares, you’ll often need a Share Sale Agreement rather than (or in addition to) a standard asset sale arrangement.
How Does “Going Concern” Relate To GST?
Many people first encounter the term “going concern” because of GST treatment.
In some circumstances, a sale of a going concern can be zero-rated for GST (meaning GST is charged at 0%). This can be a big cashflow issue for buyers and a big compliance issue for sellers.
However, GST “going concern” rules are technical and fact-dependent. Whether zero-rating applies can turn on the specific statutory requirements, what is actually being supplied, and how the contract is drafted (including whether both parties are GST-registered and the required statements are included). This information is general only and isn’t tax advice - it’s worth getting accounting and legal advice early so the contract terms, settlement mechanics, and invoicing all line up.
Why Sell A Business As A Going Concern? (The Key Benefits)
If you’ve built a business that runs well day-to-day, a going concern sale is often the best way to preserve its value.
1. You’re Selling Value, Not Just Assets
A profitable business is worth more than its equipment and stock. A going concern sale is usually focused on selling the “engine” of the business - things like goodwill, repeat customers, brand reputation, and proven systems.
That’s why buyers are often willing to pay a premium for a going concern compared to buying assets and trying to rebuild the rest from scratch.
2. It Can Make The Buyer More Comfortable
From the buyer’s perspective, a going concern is (ideally) a business with:
- stable revenue
- clear operations
- staff who know what they’re doing
- documented supplier and customer contracts
That can mean a smoother negotiation and fewer conditions before settlement - especially if you’ve got your legal foundations tidy.
3. A More Efficient Handover
Going concern sales often include a transition period, training, and a structured handover of systems, supplier accounts, and customer communications.
This can reduce the risk of “value drop” immediately after settlement (for example, where customers or staff leave because the transition is messy).
4. GST And Cashflow Advantages (Where Zero-Rating Applies)
Where the sale can be structured to meet the requirements for GST zero-rating, the buyer may avoid having to fund a large GST amount at settlement (even if it could later be claimed back). That can make your business more attractive and reduce friction during negotiations.
Because this depends heavily on the statutory tests, the contract wording, and the real-world supply of the business, it’s important the contract is drafted carefully (and not patched together from generic templates).
What’s Usually Included In A Going Concern Business Sale?
This is where many disputes start: one side assumes something is included, the other side assumes it’s excluded.
In a going concern transaction, the sale documents should clearly list what’s transferring. Depending on the business, this often includes:
Business Assets
- plant and equipment
- vehicles (if owned by the business and included in the deal)
- inventory/stock (often valued at settlement)
- business records and certain operational documents
Goodwill
Goodwill is usually a major part of the sale value. It’s the “intangible” benefit of buying an established business - reputation, customer loyalty, proven systems, and the likelihood the business will keep earning after settlement.
Business Name, Branding, And IP (If Owned By You)
Depending on your structure, the business name, domain names, logos, and other intellectual property might be:
- owned by you personally
- owned by your company
- licensed from a third party
This is why it’s important to confirm ownership and include transfer steps in the sale process (for example, handing over domain registrar access and social media accounts).
Premises Arrangements (Lease Assignment Or New Lease)
If the business operates from commercial premises, the buyer typically needs the legal right to occupy those premises after settlement. This could happen via:
- assignment of your existing lease (with landlord consent), or
- a new lease between landlord and buyer.
Where a lease is being assigned, the documentation matters. A properly drafted Deed Of Assignment Of Lease helps record the transfer and any conditions (including any ongoing obligations you may still have).
Contracts And Key Relationships
A going concern sale often assumes the buyer will step into the benefit of key arrangements - but contracts don’t always automatically transfer.
This can include:
- supplier contracts
- customer contracts (especially B2B)
- maintenance agreements
- software subscriptions
- licences and permits (not all are transferable)
Sometimes you’ll need formal assignment or consent from the other party. Some contracts restrict assignment even where a “business is sold”, and some counterparties may treat a share sale (change of control) as a trigger for consent or termination. Sometimes the buyer will enter new agreements and you’ll help transition the relationship.
Employees (Or At Least The Plan For Employees)
Staff are often core to the value of a going concern, but employee arrangements need to be handled carefully. You can’t treat employees like assets that automatically “come with the sale”.
In many transactions, the buyer will make offers to employees, and employees choose whether to accept. However, there are NZ-specific exceptions and additional obligations in some cases (for example, “vulnerable worker” protections under Part 6A of the Employment Relations Act 2000, which can require continuity/transfer on a sale or contracting change in certain industries).
Either way, the sale agreement should be crystal clear about:
- who is responsible for employee entitlements up to settlement
- whether employees will be offered roles and on what terms (and any continuity obligations that apply)
- what happens if key employees don’t accept an offer
If you need to tidy up employment documentation before going to market, having proper Employment Contract terms in place can reduce uncertainty during due diligence.
Customer Data And Privacy Compliance
If your business holds customer personal information (emails, phone numbers, addresses, booking histories, or health-related information), you’ll also need to think about privacy.
Under the Privacy Act 2020, you generally need to handle personal information responsibly, including during a sale. The buyer will want confidence that the data transfer (if any) is lawful, secure, and consistent with what customers were told.
Having a fit-for-purpose Privacy Policy and a clear plan for any data handover can help avoid last-minute issues.
What Are The Biggest Risks When Selling A Business As A Going Concern?
A going concern sale can be a great outcome, but it’s not “set and forget”. The most common risks we see usually come down to unclear scope, unexpected liabilities, or a rushed handover.
1. Disputes About What’s Included
If you don’t clearly define what’s being sold, you can end up with settlement day arguments like:
- “We assumed the website was included.”
- “The stock level isn’t what we expected.”
- “This piece of equipment was supposed to stay.”
- “We thought the supplier contract transferred.”
This is why the schedule of assets, inclusions/exclusions, and transfer steps needs to be properly documented, usually in a Business Sale Agreement.
2. Lease And Landlord Issues
If the landlord won’t consent to assignment (or consent is conditional), the buyer may not be able to operate from the premises - which can threaten the entire deal.
To reduce this risk, you’ll usually want to identify early:
- what the lease says about assignment
- timeframes for landlord consent
- any personal guarantees or security you’ve given
- whether you’ll be released from obligations after assignment
3. Employee Claims Or Unclear Entitlements
Employee matters can derail a sale if there are outstanding entitlements, undocumented arrangements, or “handshake deals” around commissions, bonuses, or hours.
Even if the buyer takes on employees, you still need to be clear about where liabilities sit up to settlement, and what you’re warranting about payroll compliance (including any obligations that may apply under Part 6A in relevant industries).
4. Buyer Due Diligence Reveals Problems Late
Buyers will typically do due diligence on financials, legal compliance, contracts, disputes, assets, IP, employment, and privacy.
If issues are discovered late (for example, a key contract can’t be transferred, your lease is near expiry, or a consent is required because of a change of control), the buyer might:
- renegotiate the price
- add tougher conditions
- delay settlement
- walk away
Getting legal support early - including a structured Legal Due Diligence Package approach - can help you spot and fix red flags before they become deal-breakers.
5. Ongoing Liability After Settlement
Sellers are often surprised to learn they can still have exposure after the business is sold, depending on the deal structure and documents.
Common examples include:
- warranties and indemnities in the sale agreement
- personal guarantees under a lease or supplier agreement
- tax/GST treatment issues if the sale is not documented correctly
- restraint of trade issues if expectations aren’t clear
These aren’t reasons to avoid selling - they’re reasons to document the deal carefully, so you’re not carrying risk you didn’t price in.
How Do You Sell A Business As A Going Concern Smoothly? (A Practical Legal Checklist)
There’s no one-size-fits-all process, but most successful going concern sales follow a similar pattern. Here’s a practical roadmap you can use to keep things moving.
1. Get Clear On The Sale Structure Early
Before you negotiate the fine print, confirm whether you’re selling:
- the business assets and goodwill (asset sale), or
- the shares in the company that owns the business (share sale).
This impacts tax, liability, what approvals you need, and what documents you’ll sign.
2. Identify What’s Included (And Excluded) In Writing
Make a working list of:
- assets (equipment, vehicles, IP, domain names)
- stock and how it will be valued
- contracts and whether they can transfer (or whether consent/change-of-control clauses apply)
- key systems (software, phone numbers, email addresses)
- records the buyer needs to operate
It’s much easier to negotiate this calmly early on than to argue about it under settlement pressure.
3. Plan For The Lease, Licences, And Third-Party Consents
Assume you’ll need time for third parties to respond. Landlords, franchisors, and key suppliers often have their own internal timelines and conditions.
If the buyer’s ability to run the business depends on these consents, the sale agreement should deal with:
- who is responsible for seeking consent
- what happens if consent isn’t granted
- whether settlement is conditional on consent
4. Treat The Handover Like A Project (Not An Afterthought)
The value of a going concern is in continuity. A handover plan often covers:
- training period (days or weeks)
- introductions to key customers and suppliers
- transfer of logins, systems, and phone numbers
- announcements to customers (where appropriate)
It’s also common to document what the seller must do between signing and settlement (for example, continuing to operate in the “ordinary course” and not making major changes without the buyer’s consent).
5. Use A Proper Completion Process
Settlement day is often where deals get stressful - not because anyone is acting badly, but because there are lots of moving parts.
A structured Completion Checklist can help keep track of what must happen before, at, and immediately after settlement (including document handover, payments, releases, stocktake, and notifications).
Key Takeaways
- Selling a business as a going concern usually means you’re selling an operating business that can continue running after settlement - not just standalone assets.
- A going concern sale can help you preserve goodwill and overall value, and it often leads to a smoother transition for customers, suppliers, and staff.
- What’s included must be clearly documented, especially assets, goodwill, IP, stock, premises arrangements, contracts, and the plan for employees (including any NZ-specific continuity obligations that may apply in certain industries).
- Common risks include disputes about inclusions, lease consent problems, employee entitlement issues, late-stage due diligence surprises, and ongoing liability after settlement.
- GST “going concern” treatment (including potential zero-rating) depends on your specific circumstances and the contract wording, so it’s important to get legal and accounting advice early.
- A well-drafted Business Sale Agreement and a clear settlement plan reduce friction and help protect you from avoidable disputes.
If you’d like help selling a business as a going concern (or you’re not sure what structure and documents make sense for your deal), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
