Who should sign a letter of intent when buying through a company?

BDC says a letter of intent must be signed by the seller, the buyer and the other parties involved, as the case may be. When the buyer is to be a company, the question is which name goes on the signature line and whether that company exists yet. This page covers the federal rule for a company under the Canada Business Corporations Act and one Ontario sentence. It is not advice on holding structures; see whether to buy through a holding company.

Why the signer matters even for a mostly non-binding letter

BDC says that, where the letter so provides, a letter of intent creates binding obligations on one party or the other, particularly on confidentiality and exclusivity. So a letter that is not intended to be fully binding can still contain binding terms. Whether it is the company or you personally is worth settling before anyone signs.

The company does not exist yet

Section 14(1) of the Canada Business Corporations Act says that, subject to that section, a person who enters into, or purports to enter into, a written contract in the name of or on behalf of a corporation before it comes into existence is personally bound by the contract and is entitled to its benefits. Under subsection (2), the corporation may, within a reasonable time after it comes into existence, adopt the contract by any action or conduct signifying its intention to be bound. On adoption, a person who purported to act for it ceases, except as provided in subsection (3), to be bound by the contract or entitled to its benefits.

Court orders and express wording

Subsection (3) lets a party to the contract apply to a court for an order about the obligations and liability of the corporation and the person who signed, whether or not the contract is adopted, subject to subsection (4). Subsection (4) says that if the written contract expressly so provides, a person who purported to act for the corporation before it existed is not in any event bound by the contract or entitled to its benefits. Ask your lawyer whether the letter should say so.

A company incorporated elsewhere

Section 14 applies to a corporation, which section 2 of the federal Act defines as a body corporate incorporated or continued under that Act and not discontinued under it. Ontario’s Business Corporations Act has its own section 21, which covers an oral or written contract made in a corporation’s name before it exists; the federal section covers written contracts. For a company incorporated under any other statute, check your province’s corporate statute with a lawyer.