Who is responsible for unpaid wages after a sale?

Unpaid wages sound like a simple bookkeeping catch-up item, but employment standards legislation gives wage claims real teeth, and the sale of a business does not make an existing wage debt disappear — it just changes who is positioned to answer for it.

Share sale: the corporation still owes what it owed before

A share sale does not touch the corporation’s liabilities. If wages were unpaid the day before closing, they remain unpaid the day after, owed by the same legal employer, which the buyer now owns. This is a due diligence item, not a surprise waiting to happen: payroll records and remittance history should be checked before price is finalized.

Asset sale: generally the seller’s debt, with real exceptions

In an asset sale, the seller employed the person while the wages were earned, so the seller is generally the one who owes them. The buyer is not automatically liable simply by continuing the business — but a buyer who hires the same employees under continuity-of-service arrangements, or who agrees in the purchase agreement to assume payroll liabilities, can end up responsible regardless of the general rule.

Personal liability is part of the picture

Directors can face personal liability under corporate and employment legislation for unpaid wages when a corporation fails to pay them, which is a real incentive for a departing owner to settle payroll before closing rather than leave it for the corporation, or its former directors, to sort out afterward.

How this gets handled in practice

• Payroll is reconciled and any shortfall paid out by the seller before closing
• A holdback or escrow covers any wage claim that surfaces shortly after closing
• The purchase agreement states plainly who is responsible if a claim appears later
• Source deduction remittance history is confirmed as current, not just wages themselves