What happens to accounts payable when a business sale closes?

Accounts payable are the bills a business owes suppliers for goods and services it has already received. At closing some of those invoices are always unpaid, so the purchase agreement has to say whose problem they are. It is a negotiated term rather than an automatic rule, which is why buyers and sellers sometimes discover after closing that they read it differently.

The agreement sets who pays

The purchase agreement states which liabilities the buyer assumes and which stay with the seller, and the deal structure shapes the starting point. The guide to asset sale vs share sale in Canada explains the difference. Whatever the structure, list every unpaid invoice as at the closing date and write down who settles each one.

How payables reach the price

Unpaid supplier invoices lower what a business is worth to a buyer, so they usually feed the working capital figure used to adjust the price. If actual payables prove larger than the estimate used at closing, the adjustment moves money between the parties; how a post-closing working capital adjustment works shows the mechanics. Invoices that arrive after closing for work done before it need an agreed home in the contract, or they become a dispute.

Claims that can follow the business anyway

A supplier who sold on credit may have registered a security interest against the goods. Provinces keep personal property registries for this, such as Ontario’s Access Now service and British Columbia’s Personal Property Registry, which tells buyers to search before buying personal property privately to confirm no liens are registered. Tax can follow too: in British Columbia a purchaser who does not obtain a PST clearance certificate in a bulk transaction is liable for an amount equal to the seller’s outstanding PST. Other provinces differ.

Questions to settle before closing

• Which invoices are unpaid today, and how old is each one?
• Who pays an invoice for work done before closing but billed after it?
• Has anyone searched the personal property registry for supplier security interests?
• Which tax clearances does this province make available to a buyer?