What due diligence documents should I ask for when buying a business?

A due diligence request list works best when it asks for documents rather than summaries, and when each item can be checked against something the seller does not control. A buyer who asks only for the seller’s own spreadsheet ends up verifying the seller against the seller. The groups below show where Canadian buyers usually start and where an official record offers a second opinion.

Financial records and tax filings

BDC says buyers typically ask to see historic and interim financial statements, projections, tax returns and other records, and that an accountant helps the seller prepare the statements and documents buyers expect. BDC’s own acquisition loan application asks for the business’s financial statements or income tax returns. Ask for the filed versions rather than drafts, so the figures can be reconciled to one another.

Corporate records you can check against a registry

Most corporations created under the Canada Business Corporations Act must keep a register of individuals with significant control, and every federal corporation must file an annual return with Corporations Canada, which can be searched to see whether one is due. Provincial registries differ: British Columbia’s registry, for example, supplies business summaries, filings and Certificates of Good Standing. Ask the seller for the minute book, then confirm it against the registry yourself.

Contracts, leases and people

BDC tells sellers to review their contracts, leases and business agreements before a sale, which is a fair signal of what a buyer will ask about. Request the signed versions of the main customer and supplier contracts and the commercial lease, plus a list of employees and their terms. What employment liabilities do I inherit explains why staff terms deserve their own review.

How to run the request

Send one written list with a response date, track what arrives against what you asked for, and note anything the seller declines to provide, because a refusal is itself information. BDC notes that the seller’s lawyer will supply information to buyers during due diligence, so route legal questions there and keep your own accountant and lawyer reading the documents.