Do I face reasonable notice exposure when I buy shares of a company?

Reasonable notice here means notice of termination, or pay instead of it, owed under the common law rather than under an employment standards statute. When you buy the shares of a company, the question is whether those rights stay attached to the employees you inherit. Because the employer itself does not change, the share sale does not, on its own, reset them.

The employer does not change

Under the Canada Business Corporations Act, s.15(1), a corporation has the capacity and, subject to the Act, the rights, powers and privileges of a natural person. Buying its shares changes who owns the corporation, not the corporation itself. If the corporation was the employer before closing, it is still the employer afterwards, with the same employment contracts and the same start dates.

Statutory rules and common-law rights

In Ontario, the Employment Standards Act, 2000 guide states that the ESA’s termination and severance rules are minimum requirements, and that some employees may have common-law rights greater than those. Other provinces and territories run their own regimes, so confirm the one that applies to the employees. Ontario’s s.9 continuity rule applies where an employer sells a business or a part of a business and the purchaser employs an employee of the seller. British Columbia’s s.97 deems employment, for the purposes of that Act, continuous and uninterrupted where all or part of a business is disposed of. Whether either rule matters in a share purchase, where the employer stays the same, is a question for your employment lawyer.

What to ask before closing

• A staff list with start dates, positions and pay.
• Each written employment contract, especially any termination clause, and whether a lawyer considers it enforceable.
• Any notices, claims or demands from current or former employees.
• Whether the price or an indemnity in the share purchase agreement should reflect what ending a long-serving role would cost.

Related pages: does an employee’s reasonable notice include years of service with the seller and what hidden liabilities come with a share purchase.