Can I sell my business to a competitor in Canada?

A competitor can be an obvious buyer because it already knows your market. The sale can draw competition-law review because it may remove a rival. Under the Competition Act, a merger is the acquisition or establishment of control over, or a significant interest in, the whole or a part of a business of a competitor, supplier, customer or other person, whether by purchase or lease of shares or assets, by amalgamation or otherwise.

Notification and waiting periods

The Competition Bureau may review any merger, whatever its size. Some transactions must also be notified before closing, depending on financial thresholds in the Act tied to the size of the parties and the transaction, and subject to its exemptions, so ask your lawyer to test yours. The Bureau says that once it has a complete notification there is an initial 30-day waiting period, and a further 30-day period if it asks for more information and receives complete certified responses.

What the Bureau weighs

Where a deal raises concerns, the Bureau asks whether it would likely prevent or lessen competition substantially in a relevant market, looking at concentration, market shares and barriers to entry. The Bureau says the remedy most often involves a divestiture. If, on the Commissioner’s application, the Competition Tribunal finds that substantial prevention or lessening, actual or likely, it can, subject to sections 94 and 95, order a proposed merger not to proceed and, for a completed one, order it dissolved or assets or shares disposed of.

How long a closed deal stays open

The Act bars an application to challenge a merger more than one year after it is substantially completed if it was notified or an advance ruling certificate was requested, and more than three years after otherwise. A deal that skipped the process can therefore be reviewed for longer.

What to settle before you sign

• Whether your deal is notifiable, and who prepares the filing.
• Whether closing depends on competition clearance, and what happens if the deal is delayed or blocked.
• What the buyer may see before closing; sharing information with a competitor in diligence covers the care it needs.