Selling a B2B SaaS platform in Canada

An owner who has decided to sell a subscription platform still has paperwork to assemble before a buyer can sign. A buyer can ask for it at the outset: who owns every line of code, which customers must agree before their contract moves, what personal information the platform holds and how it has been handled, and whether the numbers can be rebuilt from raw billing records. This guide follows the sequence of a sale rather than the anatomy of the business. It starts with ownership, moves to contracts, privacy and structure, then covers how information is released and what can delay closing. It is general information for Canadian sales and does not value any particular company.

Start with the ownership record

The first job is to match every contributor to a signed document. That means employees, contractors, co-founders and anything the founder wrote before the company existed. The Copyright Act makes an employer first owner of a work made by an author employed under a contract of service or apprenticeship, in the course of that employment and in the absence of an agreement to the contrary, and makes an assignment valid only if it is in writing and signed by the owner of the right or the owner’s duly authorized agent. Where a gap turns up, a confirmatory assignment signed by the contributor can close it. A gap the seller finds first can be closed before a buyer asks about it. The Canadian Intellectual Property Office registers copyright assignments, and its trademarks guide says owners should formally tell the Registrar about changes in ownership; the glossary entry on IP assignment explains the term.

Map the contracts that need a yes before they move

Customer, vendor and platform agreements each respond differently to a sale. In an asset sale the contracts have to be moved to the buyer. Treadstone Law, writing about Ontario sales, says that in many cases a seller can assign a contract’s benefits without the counterparty’s involvement unless the contract itself requires consent, which it calls extremely common for commercial contracts, and that an assignment does not automatically release the seller from its own obligations. It describes a novation as a three-way agreement that replaces the original contract. A share sale leaves the contracting company unchanged, which turns attention to change-of-control wording instead. A seller can list every contract with its assignment and change-of-control language, add the hosting, payments and email providers the platform depends on, and note which counterparties will have to be asked and in what order. The entry on the assignment clause is a starting point.

Tidy personal information before anyone asks

A platform that stores its customers’ users’ details raises privacy questions in a sale. The federal Personal Information Protection and Electronic Documents Act lets parties to a prospective business transaction use and disclose personal information without the individual’s knowledge or consent if conditions are met: they must have an agreement requiring the recipient to use and disclose it solely for purposes related to the transaction, protect it with security safeguards appropriate to its sensitivity and, if the deal does not proceed, return or destroy it within a reasonable time, and the information must be necessary to decide whether to proceed and then to complete the transaction (section 7.2(1), which does not apply where the primary purpose or result of the transaction is the purchase, sale or other acquisition or disposition, or lease, of personal information). Where it is enough for the buyer’s purposes, information can be shown as anonymized cohorts and redacted contracts. The answer on privacy obligations when a tech company is sold adds detail.

Quebec has its own private-sector privacy statute, which Law 25 amended. The Commission d’accès à l’information lists among the changes a duty to notify it and the people affected of a confidentiality incident that presents a risk of serious injury, and a duty to publish the title and contact details of the person responsible for protecting personal information. Where the seller has Quebec users, a buyer can check both.

Settle the structure with the tax adviser early

Whether the buyer purchases shares or assets drives the contract, privacy and tax questions at once. The CRA notes that a sales agreement may set a price for each asset and an amount attributed to goodwill, and that a seller who disposes of qualified small business corporation shares may be eligible for a capital gains deduction. For that reason a seller can raise structure with its accountant before a letter of intent is signed. The guide on asset sale versus share sale sets out the differences, and the answer on qualifying for the capital gains exemption explains how a company’s shares are tested.

Release information in stages

Confidentiality matters because customers, staff and competitors can all react to news of a sale. Disclosure can run in stages: a summary with anonymized metrics after a non-disclosure agreement, customer names and full contracts once the buyer is serious, and access to the code last, possibly under supervision. A data room organized by topic lets the seller control who sees what and when. A seller can stay involved after closing, and BDC lists vendor financing, an earn-out, a phased transfer of ownership or an executive, board or advisory role as ways of remaining involved.

What can delay a close

• A key customer whose consent is needed for its contract to move and who is slow to reply, or who uses the request to reopen pricing.
• A former contractor or co-founder who must sign an assignment but cannot be found, or who wants something in return.
• A hosting, payments or marketplace relationship held in the seller’s own account that cannot simply be moved to the buyer.
• A privacy question about whether customer data can move on the terms customers were originally given.
• A structure or tax point raised only after the price is agreed, which sends both sides back to the accountants.