How do I buy a business in Newfoundland and Labrador?

Buying a business in Newfoundland and Labrador follows the same broad path as anywhere in Canada: find the business, agree terms, check what you are buying, close and register what needs registering. What changes is the law that sits underneath each step. This page covers Newfoundland and Labrador only, and picks four provincial statutes and services that a buyer meets: the Corporations Act, the Labour Standards Act, the Liquor Control Act and the Personal Property Security Act, together with the province’s online company and deeds search. For the national sequence of steps, start with the national buying guide.

Buying assets from a company: the shareholder vote

If the seller is a corporation under Newfoundland and Labrador’s Corporations Act and you are buying its assets, the Act speaks to the sale itself. It says a sale, lease or exchange of all or substantially all the property of a corporation, other than in the ordinary course of its business, requires the approval of the shareholders. The sale is adopted when the holders of each class or series entitled to vote on it have approved it by special resolution. Ask the seller’s lawyer how the company will show you that approval, for example a copy of the special resolution and of the meeting notice. The Act also requires the notice of meeting to include or be accompanied by a copy or summary of the agreement of sale, so ask to see that notice as well.

What the dissent right means for your closing

The same Act gives a holder of shares of a class the right to dissent when the corporation resolves to sell, lease or exchange all or substantially all its property under section 303. Subject to section 313, a dissenting shareholder who complies with section 304 is entitled to be paid by the corporation the fair value of the shares. The notice of the meeting must say so, though the Act states that failure to make that statement does not invalidate the sale. Because the corporation, not you, owes that payment, ask how the seller plans to handle any dissent before you close.

Employees: continuity under the Labour Standards Act

The Labour Standards Act deals with a transfer of the business. Where an employer transfers, assigns or conveys its undertaking to another person or firm, and that person or firm continues the undertaking, the employee’s continued and uninterrupted employment with the new owner is considered continuous with the period of employment with the first employer, and counts against the new employer for the employee’s rights, benefits and privileges under the Act. The Act says “undertaking” includes a trade, industry or occupation. For a buyer, that means asking for each employee’s start date and the terms of their employment, rather than treating the closing date as day one.

Liquor licences need the board’s consent

If the business holds a licence under the Liquor Control Act, a licence shall not be transferred except with the written consent of the board. The board may refuse to approve a transfer on the grounds the Act lists, and a transfer is not considered completed until a new licence has been issued and the prescribed fee paid. Where a company is the licensee, its directors must present a proposed issue or transfer of shares to the board for approval, and if the board considers a substantial interest is involved, the transfer rules apply to the company as though it were transferring its licence. Make the closing conditional on the board’s decision, and confirm that with your lawyer.

Searching the registries before you close

Under the Personal Property Security Act, a person may search the records of the registry and obtain a printed search result. The Government of Newfoundland and Labrador’s Companies and Deeds Online service offers the ability to search for companies, condominiums, co-operatives, deeds, mechanics liens and lobbyists. Ask your lawyer which searches suit your deal, whether you are buying assets or shares, and what each result will and will not show. Tell the lawyer early which assets matter most to you, so the searches can be matched to them. If the business has real property, say so, and ask whether a deeds search should be part of the review; keep each dated result with your closing documents.

Federal steps run alongside the provincial ones

Some steps are federal and do not change with the province. The Canada Revenue Agency advises that after buying a business you may need a new business number, and its page covers business number, payroll and GST/HST. BDC says due diligence gives crucial information on a target’s finances, prospects and legal issues. Treat the provincial points above as part of that same review, keep the written answers from the seller, the board and your lawyer in one purchase file, and compare your plan with how the asset sale versus share sale choice affects each one.

• Is the seller a corporation under the Newfoundland and Labrador Corporations Act, and has the shareholder vote on the sale been held?
• How does the seller plan to address any dissenting shareholder?
• Which employees will continue, and what are their start dates?
• Does the business hold a Liquor Control Act licence, and will the board consent in writing to the transfer?
• Which registry searches has your lawyer run, and what did each show?