I’m Joe from Smarta Switch. Every few months I get a version of the same call: a business is being bought or sold, everyone’s focused on the goodwill, the stock, the lease, the staff, and somewhere down the list someone asks “what happens to the power contract?” Usually nobody’s thought about it properly, and it genuinely depends on how the deal’s put together.
We’re paid by the energy retailer when you switch, never by you.
The short answer
The energy contract doesn’t automatically follow “the business.” What happens to it depends entirely on how the sale is structured, specifically whether you’re buying the company itself or just its assets.
There are two common structures:
- Share sale: you buy the entity, the company that owns the business. The contract typically stays in place, because the legal entity holding it hasn’t changed.
- Asset sale: you buy the assets or the trade, not the entity. The energy account is usually still sitting in the seller’s name and needs to be actively sorted out.
Get the structure wrong in your head and you can end up assuming an account transfers when it doesn’t, or paying for a fresh contract you didn’t need to.
Share sale: the legal entity doesn’t change, so neither does the contract
In a share sale you’re buying the shares in the company. The legal entity that holds the electricity contract doesn’t change, it just has new owners sitting behind it. The ABN’s the same, the customer name on the account is the same, and the contract keeps running on whatever rate and term it was already on.
That cuts both ways. If the existing contract’s a good one, you inherit the good rate. If it’s an old standing offer or an above-market deal nobody’s touched in years, you inherit that too. (Here’s how to tell which type of contract you’re actually on.) Worth checking the contract before the deal completes, not after, so the price you’re paying for the business actually reflects what the energy’s going to cost.
Asset sale: the account is usually still sitting in the seller’s name
In an asset sale you’re buying the trade, the equipment, the stock, the goodwill, sometimes the lease, but not the legal entity itself. The energy account was opened by the seller’s company, under the seller’s name, and buying the assets doesn’t automatically move that account across to you.
That leaves two paths:
- Novate the contract. Transfer it to the buyer’s name with the retailer’s agreement, keeping the existing rates and term running.
- Close it and open fresh. The seller ends the account, the buyer signs a brand new contract in their own name, on whatever’s on offer at the time.
Which path makes sense depends on whether the existing contract is actually any good, and how much time is left on it. Neither is automatic. Both need to be organised, not assumed.
Novation: how a buyer can keep the seller’s rates
Novation, sometimes called assignment, is the process of transferring the existing contract to a new party without cancelling it and starting again. It can be written into the sale contract as a clause, so the buyer assumes the seller’s existing rates and avoids an early termination fee for ending the contract mid-term.
Here’s the part people miss: putting a novation clause in the sale contract doesn’t make it happen. The retailer still has to agree. It’s their contract too, and they’ll usually want the buyer’s details, sometimes run a credit check, before they sign off on swapping the customer over. If nobody talks to the retailer until settlement week, that agreement might not be in place in time.
The fix is simple: raise it early. If novation’s the plan, get your solicitor or your broker onto the retailer while the sale contract’s still being drafted, not the week you’re trying to settle.
The site and the NMI don’t change, only who’s on the account
Regardless of how the deal’s structured, the site itself doesn’t move. Same address, same meter, same NMI, the National Metering Identifier that uniquely tags that connection point. Buying or selling a business doesn’t touch the network side of things at all.
What changes is who the account holder is: the name and the entity the retailer is billing and dealing with. That’s a paperwork change, not a physical one, but it still needs to happen properly on the retailer’s side, or you end up with confusion over who’s actually authorised to deal with the account.
Why the new owner needs a fresh Letter of Authority
This is the bit that catches people out. Any Letter of Authority the seller had in place, whether it was with us or another broker, was signed by the seller. It doesn’t carry over to the new owner. (Full plain-English breakdown of what an LoA actually is and isn’t.)
So after a sale, the new owner, or their broker, generally needs to sign a fresh LoA before anyone can request meter data, get quotes, or action anything on the account with the retailers. It’s a one-page admin document, not a new supply contract, and it costs nothing to sign. But without it, nobody can legally act on the account for the new owner, including checking whether the rate they’ve inherited or been handed is actually any good.
Before settlement: what sellers and buyers should each check
If you’re selling
- Work out the structure early. Share sale or asset sale changes everything about what happens to the account, and it’s usually decided by the lawyers well before anyone’s thinking about power bills.
- Pull the current contract together. Rate, term, end date, any exit fee clause. The buyer’s solicitor will ask, and having it ready speeds the whole thing up.
- Decide on novation versus a clean handover. If the contract’s a good one and there’s real time left on it, novation protects the buyer from a worse rate and protects you from an early termination fee.
- Talk to the retailer before settlement, not after. Don’t leave the account transfer as an assumption sitting in the contract of sale.
If you’re buying
- Ask what structure the deal is. Your solicitor will know, but get it confirmed in plain terms, because it decides whether you inherit the contract or start fresh.
- Get the existing contract details. Rate, term, end date. Compare it to current market pricing, an inherited “good” rate from two years ago might not be good anymore.
- Decide if novation is worth pursuing. Worth it if the rate’s genuinely competitive and there’s meaningful time left on the term. Not worth it if the rate’s ordinary or nearly expired anyway.
- Sort your Letter of Authority early. Get it signed as part of settlement, not as an afterthought once you’re already trading.
What to do this week
- Check which structure your deal is. Share sale or asset sale, ask your solicitor if you’re not sure, it changes everything below it.
- Find the current energy contract. Rate, term, end date, exit fee clause. Get it in front of whoever’s handling the sale.
- Get it checked before you sign anything. Send us the current bill and tell us whether it’s a share sale or an asset sale. We’ll tell you whether novating makes sense or whether you’re better off requoting the market fresh, no cost to ask.
A business sale has enough moving parts without the power bill turning into a surprise three months later. Sort the structure, sort the contract, sort the LoA, in that order, and it’s a non-event.
Joe Lawrence, Co-founder, Smarta Switch Australia 0435 642 592 · joe@smartaswitch.com.au