Brian Wilson Law | Law Simplified | Selling Your Business

Selling Your Business

Sale of a Business

Are you in the process of selling your business?

Why Do I need a lawyer?

– To help ensure the sale agreement is structured in such a way as to be in your best interests as the seller; and

– To help ensure that the sale agreement closes in accordance with the terms of the sale agreement and that you get what you bargained for.

Asset Purchase or Share Purchase

The sale of a business takes 1 of 2 forms:  asset sale or share sale.

Asset Sale

With an asset sale, you as the seller sell the assets of the business (equipment, leasehold improvements, inventory, goodwill, customer lists, etc.) to the buyer but not the debts of the business. The debts must be paid  by you at the time of sale, usually from the sale proceeds.  Buyers typically prefer an asset purchase so they do have to worry about assuming unknown debts.  From a tax perspective, an asset purchase is often more favourable to the buyer but this is a matter to be discussed with your accountant.

Share Sale

Where the business is incorporated, the sale of a business can also be done by way of a share sale.  The buyer purchases your shares of the company, thus becoming the owner of the business (by becoming the owner of the company).  The assets of the business remain with the company and in most cases, so do the debts.  The biggest advantage of a share sale is that in most cases, there is no change of ownership in the assets, equipment and debts and fewer changes needs to be made as far as changing over supplier accounts, utilities, etc.  However, other items do require changes (consent of the landlord, consent of the franchisor (for franchise sales) signing authority on bank accounts, some licences (eg. liquor licence).  From a tax perspective, a share shale is often more favourable to the seller but this is a matter to be discussed with your accountant

The Process:

  • If a business broker is involved, the broker may handle the drafting of the Sale Agreement or the buyer’s lawyer may prepare it.  The Sale Agreement is the single most important legal document for the whole transaction.  So before committing to the sale agreement, we recommend that you contact us so we can meet and discuss the terms of the sale and determine if certain changes are required.
  • After the sale contract has been signed, the buyers attend to satisfying their conditions (securing financing, due diligence (reviewing your business records, etc.), obtaining the necessary consents (landlord, franchisor, licencing bodies, etc.).  This process typically takes a few weeks to be completed properly as third parties such as landlords need time to respond.
  • Once the conditions are satisfied, the sale contract becomes “firm” (goes ahead) and the parties begin to prepare for the closing.
  • We co-ordinate with the buyer’s lawyer and prepare other documentation for the transfer.
  • We meets with you to review and sign the closing documents including the financial breakdown.
  • We courier closing documents to buyer’s lawyer / receive money and other documents from buyer’s lawyer by courier.
  • Once both sides are satisfied with each other’s deliveries, the transaction is considered complete.
  • We send you a final report with all the documentation (a few weeks after closing).

Costs

You legal expenses are made up of:

  • A legal fee that we charges for our services;
  • Legal expenses (eg. registration costs, couriers, etc.) incurred as part of our work; and
  • HST

For business sales, the total costs depend on the nature of the transaction itself and we typically charge you based on time spent at a set hourly rate.  In some cases, unexpected problems arise which can drive up the costs.  However, we attempt to provide you with a range for your anticipated legal costs.

Feel free to contact us and we will be pleased to review your needs and provide you with the estimated costs.