Selling a mobile app business in Canada

An owner who has decided to sell a mobile app business has more control over the result than it may feel like, because much of what can lower the price can be fixed before a buyer looks. Three things to settle before listing are who the developer accounts belong to, whether the company can prove it owns the code, and what the app does with user data. This page takes them in the order a seller would deal with them, then covers the form of the sale, confidentiality and what delays a close. It describes a sequence, not a recommendation to sell. Brokers who work with digital businesses can help once a buyer needs to be found.

Start with who holds the accounts

List the legal holder of every store account, ad-network account, analytics tool, cloud host and domain registration. If the app is published under the founder’s personal account on Apple’s App Store or Google Play, moving it into the company before listing is easier to explain than a problem a buyer finds in their own review. Whether an app can move between developer accounts, on what conditions, and whether reviews, ranking history and subscribers stay with it are questions for each store’s current developer documentation, since store rules change. If the only route is republishing as a new listing, that history may not come with it, and a seller can be ready to explain what does. Whether handing over a login is permitted is a question for the store’s terms and for a lawyer.

Show that the company owns what it is selling

Gather signed paper for everyone who has written code, drawn screens or composed content for the app. Under the Copyright Act the author of a work is its first owner, and an employer is 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 any agreement to the contrary. An assignment of copyright is valid only if it is in writing signed by the owner or the owner’s duly authorized agent. A contractor can therefore be a gap: without a signed assignment, the code they wrote may still be theirs. A confirmatory assignment collected now is easier than one demanded from a former developer in the middle of a deal. If the app’s name is a registered trademark, the Canadian Intellectual Property Office accepts documents for registering a transfer of ownership, so the registration can follow the sale.

Settle the privacy position before a buyer asks

Update the privacy policy so it matches what the app and its embedded third-party code actually do, and gather the consent records. Showing user data to prospective buyers is itself regulated. PIPEDA section 7.2 allows the parties to a prospective business transaction to use and disclose personal information without the individual’s knowledge or consent if conditions are met: an agreement under which the recipient will use and disclose it solely for purposes related to the transaction, protect it with safeguards appropriate to its sensitivity and return or destroy it if the deal does not proceed, and the information must be necessary to decide whether to proceed and, if the deal goes ahead, to complete it. The section does not apply to a transaction whose primary purpose or result is the purchase, sale or other acquisition or disposition, or lease, of personal information. That points toward a non-disclosure agreement with those terms, and toward aggregate figures and cohort charts until a buyer is serious. After closing, continued use depends on further conditions, including that one of the parties tells the individuals, within a reasonable time, that the transaction has been completed and their information disclosed. Quebec’s law has its own rule for communication needed to conclude a commercial transaction, with its own conditions.

Decide what is being sold

Whether the buyer takes the company or only its assets changes the paperwork. A share sale leaves the developer accounts inside the company, while an asset sale means each store listing has to be moved to the buyer’s account and the buyer takes only the liabilities it agrees to; the asset sale versus share sale guide sets out the trade-offs. GST/HST adds a wrinkle. The CRA says a seller may be able to elect jointly with the buyer to have no GST/HST payable on the sale of a business, but not if only one or more assets of the business are sold or if the seller is a registrant and the purchaser is not, so a sale of just the code and the listing may fall outside that election; the CRA also lists supplies, such as taxable services to be rendered to the purchaser, on which GST/HST is still charged even with the election. The CRA also says that a seller whose business has employees must close its payroll account, and that a seller with a GST/HST account must contact its tax services office to close it.

Keep it confidential and plan the handover

An app is public by nature, so confidentiality means protecting the numbers and the fact of the sale, not the product. Revenue, retention and acquisition data can go to buyers who have signed a non-disclosure agreement, and the NDAs in a business sale guide covers what those contain. Staff, contractors and ad partners can be told only when the deal requires it. Releasing updates and answering reviews during the process keeps the listing looking cared for, which a buyer can see. Where downloads follow the founder’s own audience, a handover period is worth planning for, and it can become part of the price discussion.

What can delay a close

• A store transfer that has to wait on the stores’ own steps, so the closing date cannot be fixed until both sides know what each store requires.
• A contractor who cannot be found or will not sign an assignment, leaving part of the code without clear title.
• A privacy policy that does not match the third-party code in the current build, which sends the buyer back to ask what else was left out.
• Revenue figures that do not tie to the stores’ payout reports and the bank statements.
• A founder who has not agreed to a handover period, in an app that depends on the founder’s own social following.