Buying or Selling a Business
Updated: Jul 7, 2020
Buying or selling a business can be a complex transaction. Buyers want to ensure they are paid, and sellers want to know that they are getting what they expect and will have no unexpected surprises. Our legal services are essential as we have extensive experience in these types of transactions.
Generally, things start with a buyer wanting information about the business. Sellers are reluctant to disclose private financial and other information. We will draft a non-disclosure and confidentiality agreement that protects the seller’s information and at the same time allows information to be shared with the buyer’s bank and accountants.
The parties will move on to discuss the price and terms of the deal. This will cover more than just the price. Sometimes a buyer will want key personnel including the former owner to remain active in the business for a period of time to familiarize the new owner. Sometimes the new owner will want a non-completion agreement with the seller. Depending on the nature of the business, some assets like inventory and accounts receivable will be a “moving target” and will need to be provided separately in the agreement. We can help by advising on the options to handle all these matters and more.
We will also discuss with you, usually conjunction with your accountants, whether buying the assets of the business or buying the shares of the company operating the business is most beneficial. There are many factors relating to taxation, financing, and other matters. The choice can also affect the price.
We can then assist in drafting the agreement of purchase and sale. This will involve ensuring that there are clauses that ensure there is a good title to the assets of the business, that the many potential claims of governmental agencies are checked, licenses and permits are transferable, all tax remittances have been made (e.g. HST and payroll), all supplier contracts or franchises are transferable, among many other things.
We will work with your bank to ensure that all bank security has been placed and other conditions have been met so that your bank will advance the funds for the purchase. Prior to closing the purchase, there is a phase called “due diligence”. We will check that all of the things that have been promised in the agreement of purchase and sale are in fact true and all aspects of the transaction can proceed as intended.
Then comes the closing day. Often there are inventory counts that have been arranged that you will have to attend to. Buyers will need to do their final inspection of the assets being purchased. The purchase price will be assembled by the Buyer’s lawyer from financing and from the buyer's own resources. Generally, there is a closing agenda of documents that the lawyers have prepared prior to closing. That will list all documents that the parties need to sign in order to complete the purchase. When all documents have been signed and approved by the lawyer representing each side the money is paid to the seller’s lawyer and the buyer is now in business.
This is a very general outline and we would welcome assisting you with your sale or purchase.