In Australia, transaction intermediaries – such as Business Agents, Estate Agents, Corporate Advisors, etc. – are subject to a stringent licensing regime operating at both State and Federal levels.  The licensing system is designed to ensure only appropriately qualified and experienced professionals are in place to effectively represent business & investment opportunities to retail and professional buyers alike.

The Financial Services Reform Act 2001 operates at a Federal level and is regulated by the Australian Securities and Investment Commission (ASIC).  ASIC issues Australian Financial Services (AFS) licenses to authorise financial services business (such as Banks, financial planners, corporate advisors, stockbrokers) to represent financial products to the professional and/or retail investor market.

At a State level, business brokers are captured under Real Estate legislation, alongside Property agents (and sometimes other classifications).  The Department of Fair Trading or its equivalent in each State is responsible for the regulation of the property services industry under the following acts:

Although the legislation differs in each State, core to its content and structure is the requirement for any person or corporation involved in transacting business and/or property sales to hold an appropriate license.  Some exemptions do exist – specifically for holders of an AFS license or insolvency practitioners – but they are few and far between. 

It may surprise you that chartered accountants or CPAs are not exempt from the legislation and in most cases are required to hold either an AFS license or a Business/Estate Agent’s license to represent a business for sale.  The same goes for “management consultants” or “corporate advisors” who attempt to structure their engagements in such a way as to circumvent the requirements of the legislation.

‘But does it really matter?’, I hear you ask.  ‘I’ve known my accountant for years and I only trust them to represent me when the time comes’, or ‘these guys have been selling businesses for years without a license and have never been caught’.

Unfortunately, it all appears rosy until something goes wrong.  If you as a business owner had a bad experience with an unlicensed broker and sought to take legal action for damages, the broker’s Professional Indemnity insurance would not cover such a claim, leaving you potentially out of pocket in a big way.  On the plus side for you, an unlicensed broker legally has no claim for commission payable should they successfully sell your business, so this could be a financial gain for you (although I can’t imagine it wouldn’t be ugly with many thousands fo dollars enriching lawyers during the dispute).

Secondly, the consequences for trading without a license are severe, with penalties ranging from fines ranging upwards of $10,000 to prison sentences of up to 2 years in some States.

So, caveat emptor – buyer beware.  It is illegal for an unlicensed person or corporation to act as your agent when selling your business and it could have ugly consequences for both parties if it all goes sour.  And as one of the good guys who has invested considerable time, effort and money to attain appropriate licenses, I urge you to help stamp out the illicit operations of those that would openly flout the law by not using their services.

For more information on Business Broker licensing, contact the Australian Institute of Business Brokers.

Andrew Cassin is the Principal of Acquisiti and is licensed as a Business Agent in NSW, QLD and VIC.