Selling a micro-SaaS product in Canada

A small software product may not need a licence or regulator approval to be sold, which can make it easy to assume the sale will be simple; confirm with your lawyer whether any approval applies to yours. Delays can come from somewhere else: accounts that sit in the founder’s name, code that was never formally assigned, and customer data that cannot simply be handed across. This guide is for an owner who has already decided to sell and wants to know what to fix before a buyer sees the product, how to show customer information without breaching privacy rules, and what can slow a closing. It describes the general sequence rather than any one deal, and a lawyer and accountant should shape the details.

Decide what is being sold

Start by working out exactly what the buyer would own. A product may sit inside a company or in the founder’s own name, and the bundle can include the code and its repository, the domain, the hosting and billing accounts, the customer relationships and data, the brand and any marketing assets. Whether the deal is a sale of shares or of assets follows from that, and the guide on asset sale versus share sale sets out the differences. The CRA notes that a sales agreement may set a price for each asset and an amount attributed to goodwill, so agree early how the price will be allocated. If you are a GST/HST registrant, ask your accountant about the joint election on Form GST44: the CRA says it cannot be made if you sell only one or more assets of your business, or if you are a registrant and the purchaser is not.

Move the product off your personal name

Move each account the product depends on into the company or behind a role-based login: domain registrar, DNS, hosting, source repository, payment processor, app-store developer account, email service, analytics and error monitoring. Whether a given provider lets an account change hands, and what it asks of the new owner, is set by that provider’s own terms, so read them early and ask support before a buyer is waiting on the answer. Write the runbook at the same time: how releases go out, how billing problems are handled, how support is answered. BDC advises documenting standard operating procedures so that operations transfer more easily, and the entry on domain and account transfer describes the mechanics.

Tie off ownership of the code

List every person who has written code for the product and find the paper for each. The Copyright Act gives an employer first ownership of work an employee makes in the course of employment unless there is an agreement to the contrary, but no assignment of copyright is valid unless it is in writing and signed by the owner of the right or the owner’s duly authorized agent. Contractors and former collaborators therefore need signed assignments, so ask for them before a buyer is waiting on them. Moral rights cannot be assigned but may be waived in whole or in part, so ask contributors for waivers as well.

Share customer data only as the law allows

Customer records are personal information, and a sale does not suspend privacy law. PIPEDA lets the parties to a prospective business transaction use and disclose personal information without the individual’s knowledge or consent if they have entered into an agreement that requires the recipient to use it solely for purposes related to the transaction, protect it with safeguards appropriate to its sensitivity, and return or destroy it within a reasonable time if the deal does not proceed, and if the information is necessary to determine whether to proceed and, if so, to complete the transaction. A confidentiality agreement with those terms before any customer-level file is shared, and aggregate figures until the buyer needs more, is one way to stay within that rule.

After closing, the same relief continues on further conditions: the parties agree to use and disclose the information only for the purposes it could already be used for, to protect it and to honour any withdrawal of consent; the information is necessary for carrying on the business that was the object of the transaction; and one of the parties notifies the individuals, within a reasonable time, that the transaction has been completed and that their information was disclosed. The exception does not apply where the primary purpose or result of the transaction is the purchase or sale of personal information itself, so a deal that is mostly a customer list needs separate advice. For Quebec customers, the Commission d’accès à l’information (in a French-language summary) describes a parallel rule allowing a business, on conditions, to communicate personal information without consent where that is necessary to conclude a commercial transaction, and it requires an assessment of privacy factors before personal information is communicated outside Quebec, which matters if the buyer is elsewhere.

Finding buyers while staying quiet

The product itself may be public, in which case confidentiality is about the sale rather than the software. Describe it without naming it, require a confidentiality agreement before revenue data or the address is shared, and release information in stages. BDC notes that owners of smaller companies may consider listing on a business-for-sale website. BDC also says a broker or other intermediary can help you approach potential buyers. Deavo is a listings platform, not a broker, and never represents either side of a deal.

What can delay a closing

• An account that needs approval from a provider the seller has never dealt with, discovered only when the buyer asks for administrator access.
• A former contractor who cannot be found, or will not sign an assignment, after the buyer has been told the seller owns everything.
• A privacy policy or terms of service that do not match what the product really does with data, found by the buyer instead of disclosed by the seller.
• Revenue that does not reconcile between the processor’s payouts, the bank account and the books.
• Disagreement about the handover. BDC lists vendor financing, an earn-out, a phased transfer of ownership and an advisory role as ways a seller can stay involved after a sale, and notes that buyers may insist on a reduced price if the seller cuts all ties.