Corporate & Business Law
We have extensive experience with business start-ups, expansions, reorganizations, family succession or
Purchase and Sale of Business
When considering either the purchase or a sale of a business, the first issue is whether it will be an asset sale, or if the business is incorporated, a share sale. The seller typically wants to have it structured as a share sale, as this will be more tax efficient for the seller. For the buyer, an asset sale is generally favoured, as the buyer may not want to inherit liabilities from the seller’s corporation, or the buyer may want the assets being purchased to have a different tax value than what the seller has.
It is important to engage a lawyer early in the process, and preferably at the initial stage which normally is the negotiation of a non-binding letter of intent, which sets forth the basic business deal between the buyer and the seller.
A letter of intent will also provide for a due diligence period, which is typically 30 to 60 days, during which the buyer after having signed a confidentiality agreement, is given the opportunity to do financial and legal due diligence, and the importance of this from the standpoint of the buyer cannot be over-stated. Depending on the results of the due diligence, the buyer may in fact walk away, or there can be a price re-negotiation. At the same time, the buyer is usually in the process of confirming the financing, and a formal asset or share purchase agreement is negotiated, in which the seller makes representations to the buyer, such as the liabilities of the entity being sold. There may also be non-competition and non-solicitation covenants included in the sale agreement, which need to be carefully drafted in order to make them enforceable.
If it is a sale of shares in a corporation, from the standpoint of the buyer, it is usually preferable for tax reasons to have the seller’s shares redeemed by the corporation. We have over twenty years of experience with the sale and financing of businesses, and will make the deal happen in the time frame that meets the buyer’s and seller’s needs.