Can I step back from day-to-day work while deciding to sell?

Delegating day-to-day work is a management choice, and under the Canada Business Corporations Act the directors may, subject to the articles, by-laws and any unanimous shareholder agreement, appoint officers and delegate to them powers to manage the business and affairs of the corporation, except the powers listed in subsection 115(3). Three things follow: what stepping back leaves unchanged, what a buyer will see, and who will notice.

What stepping back does not change

Handing off daily tasks does not end a director’s or officer’s duties. Under the same Act, every director and officer must act honestly and in good faith with a view to the best interests of the corporation, and exercise the care, diligence and skill that a reasonably prudent person would in comparable circumstances. A director stops holding office on death or resignation, among other events, so working fewer hours is not the same as leaving the board. The CRA adds that in certain circumstances there may be legal implications for outgoing and incoming directors, and that the corporate registry and the CRA should both hold the correct names.

What buyers will see

BDC says buyers want to understand financial performance to confirm a track record that will continue, and it lists filling human resources gaps, especially in the management team, among the steps to take before selling. BDC also says to make sure the business does not rely on your presence to continue functioning.

Who learns that a sale is being considered

BDC warns that, depending on a listing site’s confidentiality procedures, word can get out to employees, customers or suppliers that you are selling. For the transition itself, BDC suggests a plan with the buyer that covers how you will communicate with employees, customers and suppliers about the change. How long a sale takes is covered in How long does it take to sell a business in Canada?

If you plan to stay involved afterwards

BDC says a seller who wants the business to carry on smoothly can benefit from remaining involved afterwards, such as through vendor financing, an earn-out, a phased transfer of ownership, or a role as executive, board member or advisor. It also lists post-transaction involvement among the factors that can affect the final price, so settle with the buyer, in writing, whether you are stepping back now, at closing or not at all.