Can I hold back sale proceeds if the seller is about to disappear?

If you worry the seller will be hard to find after closing, the time to act is before you pay. BDC notes that the purchase agreement is where the parties decide how much of the price is paid at closing and how much is held back in escrow or made subject to conditions. Withholding money the agreement says is due is a different matter, so get a lawyer’s advice before you try it.

Why the holdback matters more than the promise

BDC says you can protect yourself by getting an indemnity agreement from the seller, promising to be responsible for unforeseen liability that could arise for a period after the sale. A promise like that is only as useful as your ability to collect on it. Ask your lawyer whether the money for a claim will sit in escrow or with a third party, and who decides when it is released. See what an escrow holdback is.

Clearances for the seller’s government debts

Some provinces let a buyer check the seller’s standing first. In Ontario, WSIB says you should get a purchase certificate when buying a business’s assets, and it may hold the purchaser liable for amounts the vendor owes if you do not get a valid one. Alberta’s WCB says a buyer has a responsibility to get a clearance when buying a business, its stock or equipment. British Columbia says a purchaser should get a PST clearance certificate and is liable for any outstanding amount if they do not.

Ontario’s old bulk sales protection

Ontario’s Bulk Sales Act was repealed on March 22, 2017, so it no longer gives Ontario buyers a statutory step to rely on. Check what your province requires. Ask your lawyer which clearances apply to your deal, when each must be requested, and whether a holdback should wait for the certificate.