Selling an e-learning platform in Canada

An owner who has decided to sell an e-learning platform has evidence to assemble. The points to be ready to show are that the company owns what it sells, that the contracts behind the revenue can move to a new owner, and that the learner data it holds can lawfully be shown and then handed over. Each of those can depend on other people signing, so the order of the work matters. This guide sets out a sequence for the work, what the law says at each step and where a closing can slip. Your accountant, your lawyer and, if you use one, a business broker or advisor each have a part in it. The detail changes with whether the deal is a share sale or an asset sale.

Start with the paper behind every course

List every course in the library and, beside it, who made it: a salaried employee, a contractor, a guest instructor or a third party whose content is licensed in. The Copyright Act makes the author the first owner, with an exception, in the absence of any agreement to the contrary, for work an employee makes in the course of employment, and it says an assignment or a licence granting an interest is not valid unless it is in writing and signed by the owner or the owner’s duly authorized agent. Where the writing is missing, ask the author to sign one now. Moral rights are a separate point. The Act says they cannot be assigned but may be waived, and that assigning the copyright does not by itself waive them, so ask contributors for a waiver as well. CIPO accepts registration of an assignment, licence or other document relating to a copyright.

Map the contracts that need someone’s consent

Make two lists. The first covers instructor and content-licence agreements: whether each can be assigned, whether a change of control ends it or opens it to renegotiation, and what happens to revenue shares afterward. The second covers the institutional and corporate contracts that produce the recurring revenue: assignment clauses, notice periods and renewal dates. Whether consent is needed turns on the contract’s wording and on whether the deal is a share sale or an asset sale, so have counsel work through the lists rather than guessing from them. The glossary explains the difference between an asset sale and a share sale. When to approach a school board or large employer is a confidentiality question as much as a legal one, so decide it with your lawyer.

Treat learner data as a legal step, not a data-room file

PIPEDA applies to personal information an organization collects, uses or discloses in the course of commercial activities, subject to the exceptions in the Act, which also allows an exemption for activity within a province whose substantially similar law applies. For a prospective business transaction, section 7.2(1) says that organizations that are parties may use and disclose personal information without the individual’s knowledge or consent if they have an agreement requiring the recipient to use and disclose it solely for purposes related to the transaction, to protect it with security safeguards appropriate to its sensitivity and, if the transaction does not proceed, to return or destroy it within a reasonable time, and if the information is necessary to determine whether to proceed and, if so, to complete the transaction. If the transaction is completed, section 7.2(2) lets them use and disclose that information without consent if they have an agreement requiring each of them to use and disclose it solely for the purposes for which it was collected, permitted to be used or disclosed before the transaction was completed, to protect it with appropriate security safeguards and to give effect to any withdrawal of consent, if it is necessary for carrying on the business or activity that was the object of the transaction, and if one of the parties notifies the individual within a reasonable time that the transaction has been completed and that their personal information has been disclosed. Section 7.2(4) says these rules do not apply to a business transaction whose primary purpose or result is the purchase, sale or other acquisition or disposition, or lease, of personal information.

Quebec has its own rules. The Commission d’accès à l’information, which publishes the Law 25 changes in French, says that since September 2022 an enterprise may, on conditions, disclose personal information without consent where it is necessary to conclude a commercial transaction. A platform with Quebec learners needs a Quebec privacy lawyer to read those conditions.

Share sale or asset sale changes the data question

An Ontario law firm’s published answer on tech sales makes the practical point. In a share sale the corporation holding the data does not change, so its privacy commitments generally continue. In an asset sale, transferring the customer database is itself a use of personal information that has to fit what customers were told. Either way, the firm says the privacy policy in force when the data was collected matters a great deal to what a buyer can do with it. Read your policy history before listing: compare what the platform tells learners it does with what it does, and close the gap before a buyer finds it.

What can delay the close

• An instructor who will not sign an assignment or a waiver, or who wants new terms before approving a change of owner.
• An institutional client that must consent to assignment and takes a full contract cycle to answer.
• A gap in breach records: PIPEDA requires an organization to keep a record of every breach of security safeguards involving personal information under its control, and to give the Privacy Commissioner access to it on request.
• Recognition from a professional or educational body whose rules on a change of ownership nobody has asked about; put the question to the body early.
• Trademarks, domain names and cloud accounts held in a founder’s or contractor’s own name; CIPO says a trademark can be transferred by assignment and advises telling the Registrar of ownership changes.

Staying involved after closing

If the founder is the face of the best courses, or the only person who understands the platform, a handover period is something to plan for. BDC notes that a seller who wants to stay involved can do so through vendor financing, an earn-out or a phased transfer of ownership, and that buyers may insist on a reduced price when a seller cuts all ties. Decide beforehand how much of that you are willing to offer and what you would want written down, with your lawyer.