Facilitating the transfer of businesses in our communities
Buying or Selling A Business
Your Business is Our Business
The purchase and sale of a business is a significant event for both the new owner and the selling party. A purchase or sale of a business may involve significant negotiations between the buyer and seller. Ideally, a team of professionals is available to provide support throughout the process. Commonly this may include lawyers, accountants, lenders, insurance brokers and business valuators. Taylor & Taylor Law Corporation regularly works with clients and their advisors to buy or sell a business, whether through asset or share sale.
Making the transaction more straightforward
Buying or Selling a Business
What does the Process look like?
Generally, the purchase of a business starts with both the buyer and the seller entering into verbal negotiations regarding a potential deal. They then decide on the structure of the deal (for example, whether the purchaser will buy shares or assets, and what conditions will be placed on the sale). The buyer and seller will also need to decide on the price to be paid for the business, and the method by which it will be paid. A lawyer can assist by providing legal advice on the structure in early negotiations.
After the structure and pricing are agreed upon, an initial agreement (sometimes called a letter of intent) may be drafted by a lawyer, setting out the key details of the agreement and allowing for due diligence to commence. At this time the buyer will also begin to secure financing, if necessary.
What is Legal Due Diligence?
Due diligence is key to any transaction. The due diligence process allows issues to be found (and hopefully addressed) as early as possible. Due diligence can help buyers avoid identifiable problems, such as tax or legal liabilities, before closing on the sale. It can also help sellers address problems before sale, and to avoid unnecessary liability from over-promising to the buyer. Lawyers help with legal due diligence, and financial professionals such as accountants typically help with financial and tax due diligence.
Who Drafts the Purchase Agreement?
Once the general terms are agreed, either the buyer or the seller (in BC, it is usually the buyer) drafts a definitive purchase agreement which outlines all essential elements of the transaction, as well as the seller’s representations and warranties about the business. Before signing, both parties should have their lawyer review the purchase agreement, so that interests are accurately represented and the deal is properly documented.
The purchase agreement will include a closing date. This is the date when the transaction will complete and legal title to the shares or assets of the business changes hands. In connection with the closing date, the lawyers will prepare a closing agenda and all the necessary corporate approvals and ancillary agreements for signature. The lawyers can also assist their clients to ensure that all the conditions of closing within the agreement are satisfied.
What happens after the deal is Closed?
After the shares or assets of the business have legally transferred to the buyer, there are still a number of post-closing steps to ensure the transfer is properly completed. For example, a notice of directors may need to be filed, or tax elections may need to be submitted. Many transactions include a working capital adjustment to the purchase price that will be completed in the first few months after closing.
Buying or Selling A Business? We Can Help.
Let us help make a complex transaction more simple.