What can I do about undisclosed liabilities after buying a business?

When a debt surfaces after closing, the first question is whether the creditor can reach you at all or only the seller. The answer depends on how the deal was structured, which regulators are involved and what your agreement says. The steps below run in that order. They are general, and a lawyer should look at the documents before you contact the creditor or the seller.

Check whether a regulator can look to you

In Ontario, WSIB says that on a purchase of a business’s assets it may hold the purchaser liable for all amounts the vendor owed up to the date of sale if you did not get a valid purchase certificate. It also says that when shares are sold no new legal entity is created, so a purchase certificate is not required. Alberta’s WCB tells buyers they are responsible for getting a clearance when buying a business, its stock or equipment. In British Columbia, the provincial PST guidance says a purchaser who does not obtain a clearance certificate before buying a business is liable for an amount equal to any outstanding amount the collector owed.

Search what is registered against the assets

In Ontario, a security interest can be perfected by registration under the Personal Property Security Act. On request for a search of a debtor name index and payment of the fee, the registrar issues a certificate stating whether a financing statement is registered under that name, and the certificate is proof of its contents in the absence of evidence to the contrary (s.43). This page’s source covers Ontario only, so for assets elsewhere ask your lawyer which registry to search. If a registration appears that nobody mentioned, ask your lawyer how it ranks and whether it attached to what you bought.

Read your agreement and act on its deadlines

Check whether the seller gave statements about debts and taxes, and whether the agreement sets a deadline for giving notice of a claim. Check whether any part of the price is held back, or whether there is an indemnity that survives closing. If so, check how and by when the agreement requires written notice of a claim, and ask your lawyer to give it in that form. Keep the invoice, assessment or demand letter. Employee-related exposure has its own rules, covered in this answer on severance liabilities.