E-learning platform due diligence

Due diligence on an e-learning platform tests what the seller has said. Much of what it checks sits in documents and registers rather than financial statements: the papers behind each course, the licences and contracts behind the revenue, the records behind the privacy claims and the searches that show who else has a claim. This guide lists what to ask for, what to search and what each finding can mean. It supports your lawyer’s checklist and does not replace it; the glossary entry on due diligence explains the process around it.

Course ownership: ask for the chain, then test it

Request a schedule of every course with its author, the date it was made, whether the author was an employee or a contractor, and the document that moves ownership. Then test a sample. The Copyright Act requires an assignment, or a grant of an interest by licence, to be in writing and signed by the owner or the owner’s duly authorized agent. If no signed writing exists for a contractor’s course, treat it as something the company may not own. Employee-made courses differ: the employer is the first owner of work made in the course of employment, in the absence of any agreement to the contrary, so employment agreements matter too.

Ask about moral rights as well. An assignment of copyright does not by itself waive them, and a waiver made in favour of an owner or licensee can be invoked by anyone they authorize to use the work, unless the waiver says otherwise. CIPO records assignments, licences and security agreements relating to a copyright, so ask for the registration certificates and have counsel check what the record shows. Trademarks deserve the same attention: CIPO says a trademark can be transferred by assignment and advises telling the Registrar of ownership changes.

Instructor licences and the contracts that carry revenue

Read each content licence for four things: whether it can be assigned, what a change of control does, how long it runs and whether the licensor can withdraw content after the sale. Read each institutional contract for assignment and consent clauses, term and renewal, data-handling schedules and termination rights. A licence that ends on a change of control, or an institutional contract that carries most of the revenue and expires soon, can affect the price or the deal. Where a consent is missing, ask counsel whether it should be a condition of closing.

Learner data, consent and breach records

Ask for every version of the privacy policy since launch, a map of what personal information is collected and where it is stored and sent, and the agreements with hosting and payment suppliers. PIPEDA requires an organization to keep a record of every breach of security safeguards involving personal information under its control, whether or not the breach had to be reported, and to report to the Privacy Commissioner any breach that it is reasonable in the circumstances to believe creates a real risk of significant harm to an individual. So request the breach record. An empty record may mean there were no breaches, or that none was kept, and the difference is a conversation. For Quebec learners, ask whether privacy impact assessments were done where the Commission d’accès à l’information says Law 25 requires them: for any project to acquire, develop or overhaul an information system or electronic service involving personal information, and before disclosing personal information outside Quebec. Where the platform serves school-age learners, read the school contracts for the education body’s own data terms.

Registry searches that show who else has a claim

Ask counsel which provinces’ personal property registries to search for the company. Ontario’s Personal Property Security Act defines an intangible as all personal property, including choses in action, that is not goods, chattel paper, documents of title, instruments, money or investment property, and it lists a security interest in an intangible among the interests it deals with, so collateral is not limited to physical goods. British Columbia describes a lien as a notice of a legal claim registered against personal property as security for a debt or loan, and Quebec keeps a register of personal and movable real rights. If a registration appears, the question is whether it is discharged at closing. Also confirm in writing who holds the domain names, cloud accounts and app-store developer accounts the platform runs on.

What the findings mean

• No signed writing for a contractor’s course: the course may not belong to the company. A signed assignment before closing addresses it; without one, ask counsel how the course should be treated in the deal.
• An instructor licence that ends on a change of control: revenue from those courses is at risk until the licensor consents, so treat it as outside the deal until it does.
• A privacy policy that does not match actual use: the gap can limit what you can do with learner data after closing and may be a compliance problem you take on.
• No breach record, or one with obvious holes: assume nothing and ask counsel whether the purchase agreement should address it.
• A registered security interest the seller does not plan to discharge: the assets stay encumbered until the secured party releases them, so ask how and when that will happen.