What off-balance-sheet commitments does a business buyer inherit?

An off-balance-sheet commitment is an obligation that does not appear as a debt in the financial statements. Which ones reach you depends first on how the deal is structured. The examples below come from Saskatchewan and Quebec, and other provinces run their own regimes, so treat them as prompts for questions, not a checklist.

In a share purchase, the company keeps everything

The Saskatchewan WCB says a share sale is one where the assets and liabilities of a company remain with that corporation, and that after a share sale the new owners are responsible for the existing WCB account and its history. That includes past due amounts, penalties charged before or after the sale date, and the firm’s experience rating. The WCB suggests a purchaser may wish to request from the seller the most recent premium rate notice and a credit check letter.

In an asset purchase, only what you assume, with exceptions

The WCB describes the key advantage of an asset sale as the purchaser not being responsible for the seller’s liabilities, but it can apply a sale levy to a purchaser who did not obtain a clearance certificate where the seller has not paid its final account balance. In Quebec, the CNESST says unsettled labour-standards claims are not cancelled when a company changes owner and that pay equity obligations are generally transferred to the new employer. It also says an employer may ask the CNESST to verify whether pay equity remedies have taken place at the company it wants to acquire.

Sites, records and promises already made

Ask whether any property the business owns or leases is an environmentally impacted site. Saskatchewan’s Environmental Code, for instance, has a chapter on transfer of responsibility for an environmentally impacted site. Ask for every contract that carries ongoing duties, such as leases, guarantees and customer commitments. Finally, check the privacy undertakings made during the sale. PIPEDA s.7.2(2) lets the parties to a completed transaction use and disclose personal information disclosed under s.7.2(1) without the individual’s knowledge or consent if, among other conditions, an agreement requires each of them to use and disclose it solely for the purposes for which it was collected, permitted to be used or disclosed before the transaction was completed.

See also what employment liabilities do I inherit and what happens between the LOI and closing.