How do wire transfers and the funds flow work at a business sale closing?

A funds flow is a schedule showing every payment at closing: what the buyer pays, what is held back, and what goes to the seller, lenders and tax authorities. Ask your lawyer who prepares it and what format they use. What you can check yourself is where the money sits, who can release it and how you confirm the account details.

Where closing money is held

Lawyers are bound by their law society’s trust rules. In British Columbia, the Law Society’s rules say a lawyer who receives trust funds must deposit them in a pooled trust account as soon as practicable, subject to exceptions such as instructions to place the funds in a separate trust account. They also say a lawyer or law firm must take reasonable steps to obtain appropriate instructions and pay out funds held in trust as soon as practicable on completion of the services the funds relate to. Other provinces’ law societies have their own rules, so ask your lawyer what governs the deal and when funds are released.

What the schedule should account for

Ask whether the funds flow shows any amounts the buyer must pay on the seller’s behalf. British Columbia’s PST guidance, for example, says a purchaser who does not obtain a clearance certificate is liable for an amount equal to any outstanding amount the collector owes. Raise these items while the agreement is still being negotiated.

Guarding against payment fraud

The Canadian Anti-Fraud Centre describes spear phishing in which a fraudster sends a spoofed email, appearing to come from a known contact, to change payment details or to ask for an urgent wire transfer. It advises verifying with the sender using contact details you already have. In a sale, treat any late change to wiring instructions the same way. Call your lawyer on a number from your own records before moving money.