Legal
The documents that decide the deal.
Purchase agreements, representations and indemnities, leases, licences, employees and closing mechanics — what each clause actually does to you.
Guides
- Quota, land and family transfers in a farm saleA farm transfer to family typically layers three separate mechanisms — an intergenerational rollover for qualifying farm property, a provincial marketing board’s family-transfer rules for quota, and a corporate or trust structure for the operating business — each with its own conditions, so the transfer has to be planned as three coordinated pieces, not one.
- Data, model and IP transfers in an AI business saleTransferring an AI business means transferring several distinct legal assets at once — the training data (and its licensing terms), the model or weights, the source code, and every contractor’s IP assignment — and each has to be confirmed as actually assignable, since a licence that can’t be transferred or a missing contractor assignment can leave a buyer without full rights to what they paid for.
- Licensing, environmental and property issues in an automotive saleAutomotive business sales commonly stall over two issues: provincial dealer or repair licensing does not transfer automatically to a buyer, and real estate ownership is a separate legal question from the operating business — both need direct regulator and legal input before closing.
- Account transfers and sales tax in an e-commerce saleMarketplace seller accounts and payment processor accounts frequently cannot be transferred to a buyer the way sellers assume, and cross-border sales tax depends on where customers are located — both need direct verification with the platforms and a tax advisor before closing.
- The letter of intent, explainedA letter of intent records the price and structure a buyer and seller have provisionally agreed on and is deliberately built as a mostly non-binding document wrapped around a small set of clauses — confidentiality, exclusivity and cost allocation — that bind both sides regardless of whether the deal ever closes.
- NDAs in a business sale, explainedA non-disclosure agreement in a business sale is a contract obligating whoever signs it not to share or misuse the confidential information they receive about the business, and it is the gate nearly every prospective buyer must pass through before seeing a company’s name, financial statements or operational detail.
- Working capital in a business saleWorking capital in a business sale is the pool of short-term assets like receivables and inventory minus short-term liabilities like payables that the buyer expects to receive at closing, set against a pre-agreed target called the peg, with the purchase price adjusted after closing once the actual number on the closing date is confirmed.
- Earn-outs, explainedAn earn-out is a provision in a business sale agreement that pays the seller additional consideration after closing, calculated against how the business actually performs once the buyer owns and controls it, used to bridge a genuine disagreement between what a buyer will pay today and what a seller believes the business will prove to be worth.
- Escrow and holdbacks, explainedAn escrow or holdback sets aside part of an already-agreed purchase price at closing, rather than paying it all to the seller immediately, so the buyer has a defined pool of money available to draw against if a representation in the purchase agreement turns out to be false or a specific liability surfaces after closing.
- The transition period after a saleA transition period is a negotiated stretch of time after closing during which the seller stays involved with the business, usually under a separate consulting or employment agreement, to transfer knowledge, introduce relationships and support the buyer, on terms — length, compensation, authority and liability — agreed as part of the deal itself rather than assumed afterward.
- What happens when a deal falls apartA business sale can collapse at almost any stage — financing falls through, a landlord withholds lease consent, diligence turns up a problem, the seller’s numbers do not reconcile, a licence will not transfer, or one side loses their nerve — and what either party can recover afterward depends on which specific clause in the agreement covered that failure.
- Patient records, licensing and regulatory approval in a practice salePatient records in a Canadian healthcare practice sale are governed by federal and provincial privacy law and by the practitioner’s regulatory college, both of which set rules for consent, custody and notification that a buyer and seller must follow. The licence itself is personal and is never part of what is sold.
- IP, code and contract transfers in a software saleIn a software business sale, intellectual property, source code and customer contracts only transfer cleanly if they were properly assigned to the company in the first place and if each contract’s own assignment terms are followed. Gaps in either one are a common reason software deals stall or reprice late in the process.
- Selling a restaurant in OntarioIn Ontario, selling a restaurant means clearing two separate regulatory tracks at once: a provincial liquor licence transfer handled by the AGCO, and a food premises licence issued locally by the public health unit covering the restaurant’s address.
- Selling a restaurant in British ColumbiaSelling a restaurant in British Columbia means working through the province’s liquor licensing branch for the liquor licence and the regional health authority covering the restaurant’s location for its food permit, two bodies that operate on separate timelines.
- Selling a restaurant in AlbertaSelling a restaurant in Alberta means working with a single provincial regulator that governs both liquor and gaming licensing, and a single province-wide health authority for food premises inspection, a simpler regulatory map than in provinces with regional or local health bodies.
- Selling a trades business in OntarioSelling a trades business in Ontario means confirming who will hold the required Skilled Trades Ontario certification after closing and obtaining a current WSIB clearance certificate, since neither the trade certification nor workers’ compensation standing transfers automatically with a change of ownership.
- Selling a trades business in AlbertaSelling a trades business in Alberta means confirming standing with WCB-Alberta, the province’s workers’ compensation board, and working out who will hold the required Skilled Trades Alberta certification once the business changes hands, since neither is a corporate asset that transfers automatically.
- Selling a trades business in British ColumbiaSelling a trades business in British Columbia means confirming clearance with WorkSafeBC, the province’s workers’ compensation board, and working out who will hold the required SkilledTradesBC certification once the business changes hands, since certification belongs to the individual, not the company.
- Selling a trucking business in OntarioSelling a trucking business in Ontario means understanding what happens to the carrier’s CVOR record and safety fitness rating, since a fresh CVOR abstract and a clear answer on whether the buyer inherits or must establish new registration are central to how the deal gets structured and priced.
- Selling a trucking business in AlbertaSelling a trucking business in Alberta means confirming carrier safety and compliance standing directly with Alberta’s own transportation regulator, since Alberta runs its own carrier safety program under the shared National Safety Code framework rather than Ontario’s CVOR system.
- Selling an auto repair business in OntarioSelling an auto repair business in Ontario means confirming whether OMVIC registration applies because the shop also sells vehicles, checking that Skilled Trades Ontario certification for its technicians can continue under new ownership, and obtaining a current WSIB clearance certificate.
- Selling a healthcare practice in OntarioSelling a healthcare practice in Ontario means working within a system where each regulated health profession has its own governing college, and where the applicable college and federal and provincial privacy law together govern how patient records and the practice transition to a new owner.
- Selling a healthcare practice in British ColumbiaSelling a healthcare practice in British Columbia means working through the applicable provincial college for the practitioner’s profession and complying with federal and provincial privacy law, and confirming the college’s current name and requirements directly, since British Columbia has been restructuring several of its health-profession colleges in recent years.
- Selling a retail business in OntarioSelling a retail business in Ontario means working through the province’s Employment Standards Act rules on continuity of employment when staff move to a buyer, obtaining a WSIB clearance certificate, and handling sales tax under Ontario’s harmonized HST system rather than a separate provincial sales tax.
- Employees when you sell a business in AlbertaEmployees are affected by an Alberta business sale largely the same way they would be in any common law province, since asset sales and share sales treat continuity of employment differently, but the specific rules, forms and enforcement bodies are Alberta’s own: its employment standards authority and WCB-Alberta, not Ontario’s Ministry of Labour or WSIB.
- Commercial leases in an Alberta business saleCommercial leases in an Alberta business sale generally require the landlord’s consent to assign and an estoppel certificate confirming the lease’s actual terms, and if the deal also involves the underlying real property, registration through Alberta’s own land titles system rather than the land transfer tax process used in some other provinces.
- Licences and permits in an Alberta business saleLicences and permits in an Alberta business sale run through separate authorities — AGLC for liquor, public health authorities for food premises, individual municipalities for general business licences, and Alberta’s own carrier registration system — and each one needs to be checked and, where required, formally transferred before closing.
- Employees when you sell a business in QuebecEmployees in a Quebec business sale are protected by the Civil Code’s own provisions on what happens to employment contracts when a business changes hands, combined with rules enforced by CNESST, Quebec’s single combined body for both employment standards and workplace health and safety — a structurally different arrangement from the split systems used in common law provinces.
- Commercial leases in a Quebec business saleCommercial leases in a Quebec business sale are governed by the Civil Code’s own lease provisions rather than the common law lease-assignment principles used elsewhere in Canada, which starts from a different default position on assignment and subletting and generally calls for a notary or Quebec lawyer to confirm how the specific lease actually works.
- Civil law and business sales in Quebec: what is differentQuebec is a civil law jurisdiction, governed by the Civil Code of Québec rather than the common law used everywhere else in Canada, which means contracts, security, property transfer and even how disputes are reasoned about work on a different structural foundation — not a provincial variation on the same rules, but a genuinely different legal system.
- Employees when you sell a business in OntarioEmployees when you sell a business in Ontario are protected by the Employment Standards Act, 2000, which continues employment automatically in a share sale because the employer never changes, and gives many employees deemed continuity of service in an asset sale unless the new owner makes a clear decision not to hire them — with separate rules again for a unionized workplace.
- Commercial leases in an Ontario business saleCommercial leases in an Ontario business sale generally require the landlord’s consent to assign, governed by the lease itself and by Ontario’s Commercial Tenancies Act, and closing usually depends on getting that consent, an estoppel certificate confirming the lease’s true terms, and clarity on whether a new personal guarantee and the leasehold improvements will follow the assignment.
- Licences and permits in an Ontario business saleLicences and permits in an Ontario business sale rarely transfer automatically: a liquor sales licence needs Alcohol and Gaming Commission of Ontario approval, a trucking or courier business needs its CVOR record reviewed, a used-vehicle dealer needs Ontario Motor Vehicle Industry Council registration, and most also need a current WSIB clearance certificate before a buyer will close.
- Employees when you sell a business in British ColumbiaEmployees when you sell a business in British Columbia are covered by BC’s own Employment Standards Act and Labour Relations Code, which continue employment automatically in a share sale because the employer never changes, and address how service and entitlements carry forward in an asset sale under BC’s own rules, separate from any other province’s statute of a similar name.
- Commercial leases in a British Columbia business saleCommercial leases in a British Columbia business sale are governed primarily by the lease itself and by general contract and property law, since BC’s Residential Tenancy Act does not apply to commercial premises, and closing typically depends on landlord consent to assign, confirmation of the lease’s actual terms, and clarity on whether a new personal guarantee will be required.
- Licences and permits in a British Columbia business saleLicences and permits in a British Columbia business sale generally require their own approval process with BC’s own regulators — separate bodies from Ontario’s AGCO, CVOR system and OMVIC — and most businesses with employees will also need a WorkSafeBC clearance letter before a buyer will agree to close.
- Farmland ownership restrictions and business sales in the PrairiesFarmland ownership restrictions in Saskatchewan and Manitoba can apply to a business sale even when the deal isn’t primarily about the land, because acquiring the shares of a corporation that owns farmland can trigger the same provincial review as buying that farmland directly.
- Lease, inventory and sales-tax issues in a retail saleA retail sale typically requires landlord consent to assign the lease and often an estoppel certificate confirming its terms, a separate physical inventory count and valuation at or near closing, and confirmation of whether a GST/HST election applies to relieve the parties from charging tax on the sale — each needs to be documented, not assumed.
- Client transfer, consent and non-competes in a practice saleSelling a practice requires checking your regulator’s specific rules on client file transfer and consent, respecting Canadian privacy obligations for personal information already collected from clients, and drafting a non-compete and non-solicit narrow and specific enough to the sale to hold up if it is ever challenged.
- The purchase agreement, clause by clauseA business purchase agreement is built from a consistent set of parts regardless of the deal’s size — the parties and what’s being sold, the purchase price and how it can be adjusted, conditions that must be met before closing, representations and warranties about the business, covenants governing conduct before and after closing, indemnification for what goes wrong, and the mechanics of closing itself.
- Representations, warranties and indemnities explainedRepresentations and warranties are a seller’s contractual statements of fact about the business, indemnities are the mechanism that lets a buyer recover money if a statement turns out to be false, and together with disclosure schedules, survival periods, and negotiated baskets and caps, they form the main way a purchase agreement allocates risk that neither side yet knows about.
- Closing mechanics in a Canadian business dealClosing day in a Canadian business sale is the point where every condition precedent has been satisfied or waived, funds move through a lawyer’s trust account to pay out the seller, any secured creditors and closing costs in a specific order, and both sides exchange the documents, such as corporate resolutions, releases, assignments and a bill of sale or share transfer, that legally complete the transaction.
- Licences, WSIB and transfers in a trades saleTrade licences are generally held by individuals, not the company, so a trades sale must confirm who will hold them after closing, obtain a current WSIB clearance certificate, and transfer vehicle registration and any liens before the deal closes.
- Liquor, food permits and lease transfers in a restaurant saleA restaurant sale requires its own liquor licence transfer or application, a new food premises permit for the incoming operator, and landlord consent to assign the lease, none of which happen automatically when ownership changes.
- Operating authority and safety ratings in a carrier saleAn operating authority and safety rating belong to the carrier that holds them, and whether either one transfers to a new owner, and in what form, depends on how the sale is structured and on the rules of the province’s regulator. This is a question to resolve directly with the regulator during the transaction, not one to assume from another deal.
- Environmental, equipment and union issues in a manufacturing saleA manufacturing sale carries three legal issues that catch people off guard more than any other: environmental conditions tied to the property’s industrial history, the tax consequence of selling depreciated equipment, and whether a union agreement continues to bind the business under new ownership. Each depends on deal structure and provincial rules, and each is worth resolving before a purchase agreement is signed.
Expert answers
- What should be in a business purchase agreement?A business purchase agreement sets out the price and structure, the seller’s representations and warranties, the disclosure schedule, the conditions that must be met before closing, and what happens to indemnities, holdbacks and covenants after closing. Every earlier deal document — the letter of intent, the due diligence findings — has to land somewhere inside this one contract.
- Are my customer contracts transferable when I sell?Customer contracts are not automatically transferable. Whether one moves to a buyer depends on its own wording, on whether the sale is structured as an asset sale or a share sale, and on general contract law default rules — many commercial contracts either require the other party’s consent to assign, or block assignment outright.
- What is an anti-assignment clause, and why does it matter?An anti-assignment clause is a contract term that restricts or prohibits one party from transferring its rights or obligations under the contract to someone else without the other party’s consent. In a business sale, that means a supplier, landlord, licensor or customer contract may not move to the buyer automatically — the counterparty gets a say.
- What can I do if the seller misrepresented the business?A buyer who discovers the seller misrepresented the business generally looks first to the representations and warranties in the purchase agreement, the indemnity clause backing them, and any holdback or escrow still available. Outside the contract, remedies can include a claim for misrepresentation, but what is actually available depends on what was said, what was disclosed, and when the problem was found.
- How long am I liable after selling my business?A seller’s liability after closing is not fixed by a set number of years — it is shaped mainly by the survival period negotiated in the purchase agreement, by any holdback or escrow securing it, and by categories of liability, like certain tax, environmental or employee successor obligations, that a private contract cannot simply extinguish.
- What is a change of control clause?A change of control clause gives a contract’s counterparty specific rights — often to consent, terminate or renegotiate terms — when ownership or voting control of one of the contracting parties changes. It matters most in a share sale, where the contracting company itself does not legally change hands, because the clause can treat that ownership shift as though the contract had been assigned.
- Do I need a lawyer to sell my business?No law requires a seller to hire a lawyer to sell a business, but the purchase agreement is a binding contract that allocates risk for years after closing, and negotiating one without legal advice is one of the more common regrets sellers report afterward. A lawyer’s role covers the agreement itself, the closing mechanics, and the corporate detail a buyer’s lawyer will otherwise handle alone.
- What happens if the buyer walks away before closing?What happens when a buyer walks away depends on which stage the deal was at and what was actually signed. Before a binding purchase agreement, walking away from a non-binding letter of intent is usually permitted, though exclusivity or confidentiality obligations can survive. After a definitive agreement is signed, walking away without meeting an agreed condition can be a breach with real consequences.
- Can I back out after signing a letter of intent?In most cases, yes — a letter of intent is generally drafted so its core commercial terms are non-binding, and either party can back out before a definitive agreement is signed. The exception is the handful of clauses an LOI typically does make binding, most often confidentiality and exclusivity, which can survive even after one side walks away.
- What is a personal guarantee, and can I get out of one?A personal guarantee is a promise by an individual — typically an owner — to personally cover a business debt, lease or obligation if the company itself does not. Selling the business does not automatically release the guarantee; the lender or landlord who holds it generally has to agree to release it, accept a replacement guarantee from the buyer, or let it lapse under the original agreement’s own terms.
- Who owns the intellectual property after a business sale?In a share sale, the company keeps owning whatever intellectual property it owned before, because the legal entity does not change. In an asset sale, intellectual property has to be identified and assigned specifically — trademarks, domain names, trade secrets, software and registered rights do not transfer automatically just because the business’s other assets do.
- What happens to my business name when I sell?What happens to a business name depends on how it is legally held and how the sale is structured. In a share sale, the corporate name and any registered trademark generally stay with the company being sold. In an asset sale, the right to use the name has to be assigned or licensed to the buyer specifically — it does not travel with the other assets automatically.
- What licences and permits transfer when I buy a business?Whether a licence transfers depends on the regulator that issued it and the deal structure. In a share sale, a licence held by the corporation generally stays valid because the licence holder has not changed. In an asset sale, most licences and permits are personal to the holder and have to be reissued or formally transferred to the buyer, often through a regulator’s own approval process.
- What does an NDA actually protect in a business sale?An NDA in a business sale protects the confidential information a seller shares with a prospective buyer during due diligence — financials, customer lists, supplier terms, employee details and operational know-how — by restricting how that buyer can use it and who they can share it with. It does not stop a buyer from using ordinary industry knowledge, and it generally does not by itself stop them from competing.
- What if there is a lawsuit against the business I am buying?An active or threatened lawsuit against a business does not automatically prevent a sale, but it should change how the deal is structured and reviewed. A buyer typically wants the litigation disclosed in full, wants to understand whether an asset or share sale leaves the exposure with the seller or moves it to the buyer, and often wants a specific indemnity or holdback tied to the outcome.
- Do I have to keep the seller’s employees?In a share sale, yes by default — the corporation stays the employer, so every employment relationship, and everything attached to it, carries over untouched. In an asset sale, you are legally free to choose who to hire, though declining to offer someone a job has consequences the purchase agreement should address before closing.
- Can I change employee terms after buying a business?You can propose new terms, but imposing them unilaterally on someone whose job has continued without a real break risks a constructive dismissal claim — the person can treat a significant change as if you fired them and claim accordingly. How much room you have depends heavily on whether you bought shares or assets.
- Who pays severance when a business is sold?In a share sale, the corporation remains the employer, so any severance liability — past or future — stays with the company the buyer just bought. In an asset sale, the seller is generally responsible for terminating its own employees, but continuity-of-service rules and the purchase agreement’s allocation of liability can shift that outcome.
- Do employees need new contracts after an asset sale?Yes. An asset sale does not carry the seller’s employment contracts across to the buyer, so each employee the buyer wants to keep needs a new offer of employment from the buyer. How that offer is drafted determines whether the person’s prior service, entitlements and terms carry forward.
- What happens to accrued vacation pay when a business sells?Accrued vacation pay is a wage the employee already earned, and it is owed by whoever employed them when it was earned. In a share sale, that is the same corporation the buyer just bought, so the liability comes along with it. In an asset sale, it is generally the seller’s debt to pay out, unless the purchase agreement says otherwise.
- Does a union follow the business to a new owner?Usually, yes. Most provinces’ labour relations legislation contains successor-rights provisions that bind a buyer to the union certification and the existing collective agreement when it acquires a unionized business, whether the deal is structured as an asset sale or a share sale — deal structure does not offer the escape route buyers sometimes expect.
- Can I lay off staff right after closing?You can, but layoff does not mean what many buyers assume it means. In several provinces a temporary layoff is legally treated as a termination unless strict conditions are met, and cutting staff soon after closing can trigger obligations that differ depending on whether you bought shares or assets.
- What employment liabilities do I inherit when I buy a business?In a share sale, all of it — unpaid wages, accrued vacation, outstanding claims and workers’ compensation history, because the employer entity does not change. In an asset sale, the default exposure is much smaller, but continuity-of-service rules, unionized workplaces and unpaid statutory remittances can still attach liability the buyer did not think it was taking on.
- How do I check employment records in due diligence?Request every employment contract, an accurate org chart, payroll and remittance records, accrued vacation and other liability balances, a workers’ compensation clearance certificate, any employment standards or human rights complaints, and confirmation of how each worker is classified. Gaps here are a common source of post-closing disputes.
- What happens to the pension or benefits plan on a sale?In a share sale, the plan generally continues under the same corporate sponsor, funding status and all, so the buyer inherits it as-is. In an asset sale, the buyer usually has to set up new arrangements or separately negotiate to assume the seller’s plan — pension transfers involve regulator and member consent steps that take real time.
- Can I make key staff sign non-competes after closing?Not by simply presenting one and expecting a signature. A non-compete imposed on an existing employee generally needs something of real value given in exchange for it, and several provinces now restrict or ban employee non-competes outside narrow exceptions — the seller’s own non-compete from the sale is a different, more enforceable, thing entirely.
- What if a key employee quits before closing?It can put the whole deal at risk, particularly for a business that depends on one or two people the buyer was counting on. Many purchase agreements treat the departure of a named key employee before closing as a material adverse change, giving the buyer room to renegotiate price, add closing conditions, or walk away.
- Do I have to tell employees before the sale closes?Generally, no — employment standards legislation does not require advance notice to staff simply because ownership is changing, and confidentiality is usually the priority right up to closing. The real deadline is practical, not legal: if the buyer needs employees to accept new offers, or the workforce is unionized, that changes when the conversation has to happen.
- What happens to contractors and freelancers in a sale?Contractor agreements follow the deal structure like any other contract — they continue automatically in a share sale, but in an asset sale they need to be validly assigned, usually with the contractor’s consent. The bigger risk is misclassification: a contractor who is really functioning as an employee can leave the buyer holding entitlements nobody priced into the deal.
- Who is responsible for unpaid wages after a sale?Wages already earned are owed by whoever was the employer when they were earned. In a share sale, that is the corporation the buyer just acquired, so the debt comes with it. In an asset sale, unpaid wages are generally the seller’s obligation to settle, and directors of the seller can carry personal exposure for wages the corporation fails to pay.
- Can a franchise be sold like any other business?A franchised location can be sold, but you are selling more than a typical business — you own the equipment, leasehold improvements and local goodwill outright, while the brand, operating system and territory rights are only licensed to you under the franchise agreement, and that licence cannot be handed to a buyer without the franchisor’s consent.
- Who has to approve a franchise resale?A franchise resale generally needs two separate approvals that run on different tracks: the franchisor has to approve the incoming buyer as a franchisee under its own screening standards, and, where the purchase is financed, the buyer’s lender has to approve the buyer and the deal on its own credit standards, independently of whatever the franchisor decides.
- What grounds can a franchisor refuse a transfer on?A franchisor can generally refuse a proposed buyer for reasons the franchise agreement sets out — insufficient financial capacity, no relevant operating experience, a poor credit or litigation history, or a conflict with a competing business — and, unlike many commercial leases, a franchise agreement does not always require that consent be reasonable, so a franchisor’s discretion can be broader than a seller expects.
- What disclosure does a franchise resale buyer get?What a franchise resale buyer receives depends first on which province the business operates in, since franchise disclosure is provincial law, not a national standard, and several provinces have no franchise-specific statute at all. Where one applies, a resale buyer’s position is often narrower than a brand-new franchisee’s, and that gap is worth confirming before relying on anything the seller hands over.
- What is franchise territory and encroachment?Franchise territory is the area, or customer base, a franchise agreement protects for a location, and encroachment is what happens when the franchisor — directly or through another franchisee — starts serving that same area in a way the incoming owner did not bargain for. A resale buyer inherits whatever territory protection the agreement actually contains, which is not always as strong as the map a seller shows.
- Can a franchisor take back my franchise location?A franchisor can generally reclaim a location in a limited set of circumstances the agreement sets out — declining to renew at the end of the term, terminating for an uncured default, or, in some systems, exercising a written buyback right — and each of these is a separate mechanism from the right of first refusal a franchisor uses only when the franchisee is trying to sell to someone else.
- Do trade licences transfer when I sell my business?No. A trade licence or certification is issued to the individual who earned it, not to the corporation or the business, so it does not automatically pass to a buyer, and a seller’s own certification does not transfer with the sale under any deal structure.
- Who keeps warranty liability after a trades business sells?A manufacturer’s product warranty stays with the equipment regardless of who owns the business, but a contractor’s own workmanship warranty is a promise made by a specific legal person, so who is actually on the hook for it after a sale depends on whether the deal is structured as a share sale or an asset sale.
- Can I transfer my liquor licence when I sell?Not in the way most sellers picture it. A liquor licence is issued to a specific licensee, not to the business or the premises, so you cannot simply hand yours to a buyer — the incoming owner generally has to apply for their own licence or go through the regulator’s formal ownership-change process before they can legally serve or sell alcohol.
- What happens to my franchise agreement when I sell?Selling a franchised restaurant does not transfer your existing franchise agreement to the buyer as-is — the franchisor almost always requires the incoming owner to sign a new agreement on its current terms, and you generally remain responsible for anything owed or done under your agreement before the sale closes.
- What happens to gift cards and deposits when a store sells?Outstanding gift cards, customer deposits and loyalty-point balances are a liability the buyer and seller generally have to divide explicitly in the purchase agreement, since in most provinces a gift card cannot simply expire and neither the buyer nor the seller can assume the other will automatically absorb it once the sale closes.
- Can a non-professional own a regulated practice in Canada?Generally, no — most regulated professions in Canada require the corporation or entity that provides the professional service to be owned by licensed members of that profession, which is why a non-professional buyer such as an investor group typically cannot directly own the professional corporation itself, though it can own the surrounding business through a separate structure.
- What happens to patient records when I sell my practice?Patient records generally move to the buyer as the new custodian, but only after patients are given notice and a chance to have their file sent elsewhere instead, and even after the sale, the outgoing practitioner typically keeps a personal professional obligation to account for those records that does not simply end because someone else now holds them.
- Who owns code written by a contractor?Under Canadian copyright law, the contractor who wrote the code generally owns the copyright in it by default, even though they were paid to write it, unless a written agreement expressly assigns that ownership to the company — the common assumption that paying for work automatically means owning it is not how the default rule actually works.
- Does a CVOR transfer when I sell my trucking company?No, not in an asset sale — the CVOR record and its safety rating belong to the registered operator, so a buyer acquiring the assets of a trucking business generally has to apply for a brand-new CVOR rather than inheriting the seller’s. In a share sale, the corporation that holds the CVOR continues to exist, so the record and rating carry forward along with the shares, for better or worse.
- Are non-compete agreements enforceable in Canada?Restrictive covenants are enforceable in Canada where they are reasonable, but the standard differs sharply by context. A non-compete given by a seller as part of a business sale is assessed considerably more permissively than one imposed on an employee, and some provinces restrict employee non-competes outright while preserving an exception for sale-of-business covenants.
- Can my landlord refuse to assign my lease when I sell?Almost every commercial lease requires the landlord’s consent before it can be assigned to a buyer. Many leases provide that consent is not to be unreasonably withheld — but a lease can expressly say otherwise, and even where the standard applies it leaves a landlord meaningful room to impose conditions.
- What happens to my employees when I sell my business?In a share sale, nothing changes for employees: the employer corporation continues and employment carries on uninterrupted. In an asset sale the buyer is technically a new employer, but employment standards legislation across Canada generally treats service as continuous where the business continues — so accumulated entitlements follow the employees to the buyer.
- Do I need the franchisor’s permission to sell my franchise?Yes. Virtually every franchise agreement requires the franchisor’s written consent before a franchised business can be transferred, and the franchisor sets the conditions on which consent is given. Many agreements also grant the franchisor a right of first refusal, allowing them to buy the business themselves on the terms your buyer has offered.
- How is the deposit handled in a business sale?A buyer’s deposit on a Canadian business purchase is typically paid on signing the definitive agreement, held by a lawyer or escrow agent rather than released straight to the seller, and applied to the purchase price at closing, with the agreement itself setting out the specific, limited circumstances in which the seller can keep it if the deal falls through.
- How are legal and accounting fees split in a business sale?In a typical Canadian business sale, each side pays for its own lawyer and its own accountant. That is the default convention, not a rule, and specific shared or one-off costs, such as a jointly engaged appraiser or particular searches and discharge fees, are allocated separately and should be spelled out in the agreement rather than assumed.
- What happens after I sign an NDA?Once you sign Deavo’s non-disclosure agreement for a listing, you get access to the business’s name, exact address and any other detail the seller had gated, a signed certificate recording the agreement is emailed to you and the seller, and the seller can then respond to your interest directly, including sharing further information as the conversation progresses.
- What does Deavo do with my data?Deavo collects the account, listing and usage information needed to run the platform, including a timestamp and IP address logged when someone signs a non-disclosure agreement, and handles it under Canada’s federal private-sector privacy law, with confidentiality tools like blind listings and NDA gating built specifically to limit who sees identifying business information.
- What records do I need to keep after selling?Keep your corporate financial records and tax filings for as long as CRA rules require, and separately keep a full copy of the purchase agreement, disclosure schedules, and any closing documents for at least as long as the representations and warranties in the deal survive, since that is the window during which the buyer could bring a claim against you.
- What happens between the LOI and closing?Between the LOI and closing, the buyer runs due diligence, lawyers draft and negotiate the definitive purchase agreement in parallel, both sides work through the disclosure schedules, and a set of closing conditions, such as financing approval or a landlord’s consent, get satisfied or waived one at a time before the deal can complete.
- What actually happens on closing day?On closing day, both sides confirm that every closing condition has been satisfied or waived, funds move by wire once that confirmation is in, signed documents are exchanged and released together rather than piecemeal, and possession of the business, including keys, systems access and often an inventory count, passes to the buyer.
- What’s the difference between assigning a lease and subletting it?A lease assignment hands the buyer the seller’s existing lease outright, a sublease keeps the seller on as tenant of record while the buyer occupies under them, and a new direct lease starts the buyer fresh on the landlord’s current terms. The three routes carry very different risk for the seller after closing, and it is usually the landlord, not the sale’s two parties, who decides which is actually available.
- Can a landlord require a new security deposit when a lease is assigned?Yes. Most commercial leases let a landlord condition consent to an assignment on additional security, and because the buyer is usually an unproven credit compared with an owner who has paid rent reliably for years, landlords often ask for a larger cash deposit, a letter of credit, or both — sized to how they assess the buyer’s risk, not to the amount the outgoing tenant originally put down.
- What is a demolition or relocation clause in a commercial lease?A demolition clause lets a landlord end a lease, usually on notice, to redevelop or alter the building, while a relocation clause lets the landlord move a tenant to different space in the same property instead of terminating outright. Both override the tenant’s expectation of a fixed term, and a buyer pricing years of stable occupancy needs to know whether either exists first.
- Am I released from my personal guarantee when I sell my business?Selling your business does not, by itself, end a personal guarantee you gave on the commercial lease, because the guarantee is a separate contract between you and the landlord. Unless the landlord agrees in writing to release you as part of consenting to the assignment, you can remain personally liable for the buyer’s rent, including through renewals the buyer later exercises, for as long as the lease runs.
- Who pays to restore the premises when a commercial lease ends?Under most commercial leases, the tenant, not the landlord, is responsible for removing leasehold improvements and returning the premises to a specified condition at the end of the term. A buyer who takes over that lease by assignment typically inherits that restoration obligation along with everything else in it, whether or not they were the one who installed the walls, fixtures, or equipment being removed.
- What is percentage rent, and does it transfer with the business?Percentage rent is additional rent calculated as a share of the tenant’s sales above an agreed threshold, layered on top of base rent. Because it is a term of the lease itself, not something tied to the current owner personally, it transfers to a buyer who assumes the lease exactly as written — so occupancy cost can rise or fall with the business’s own sales, not just the base rent quoted in a listing.
- How does a sale work when the owner personally owns the building?When an owner holds title to the real estate personally, outside the operating company, selling the business does not automatically involve the building. The buyer takes over the operating company, or its assets, and separately needs a lease with the seller as landlord, a purchase of the property, or a different location — each requiring its own negotiation, apart from the business purchase agreement.
- What happens to my lease if the landlord sells the building?A commercial lease generally binds a new owner of the building the same way it bound the old one — the new landlord steps into the lease’s existing rights and obligations, and a tenant cannot usually be evicted simply because the property changed hands. If the building sells while you are also buying or selling the business, timing can complicate exactly who has authority to consent to your assignment, and when.
- What happens if I inherit a lawsuit with the business?A claim about something that happened before closing can still be brought against you afterward if it relates to the corporation itself in a share purchase, or in narrower circumstances even in an asset purchase — which is why representations, indemnities and a defined survival period exist in a purchase agreement. They are what actually determines whether the seller or you bears the cost.
- What if the lease expires soon after closing?A lease with little time left is a problem to solve before closing, not after — get the landlord to commit in writing to a renewal or a new term as a condition of the purchase agreement, so you know what you are actually buying rather than discovering the real term only once you already own the business.
- What if the seller wants part of the price in cash?A request to pay part of the price in cash, outside the documented purchase agreement, is generally an attempt to understate the price reported for tax purposes, and it exposes a buyer to real legal and financial risk — from a purchase price and cost base that no longer match what you actually paid, to potential association with a false statement made to the CRA.
- How long from LOI to closing does a business sale take?The window between a signed letter of intent and closing runs on whichever closing condition takes longest to satisfy, since financing approval, a landlord’s consent, a licence transfer and due diligence typically proceed at the same time rather than one after another, and the slowest of them, not the sum of all of them, determines the actual closing date.
- How long does closing take once a deal is signed?Signing the definitive purchase agreement is not the same moment as closing; a closing date is deliberately set out far enough to let any conditions still outstanding at signing, such as final financing approval, a landlord’s consent or a licence transfer, actually clear, and that gap can be short when few conditions remain or considerably longer when several are still in motion.
- How long does licence transfer and landlord consent take?How long a licence transfer or a landlord’s consent to assign a lease takes is set by the regulator or landlord processing the request, not by the buyer and seller, and it depends on the specific licence or lease involved, how complete the application is on submission, and how busy that reviewer’s process happens to be — there is no single Canadian rule that applies across licence types or leases.
- Does an asset sale or a share sale take longer to close?Neither structure is reliably faster: an asset sale often needs consent for each individual contract, lease and licence, adding several third-party approvals to the timeline, while a share sale transfers the company at once but typically involves a deeper review of its corporate history and past filings first, so the time simply shows up in a different place.
- How do I choose a closing date for a business sale?A workable closing date is chosen by working backward from whichever condition is realistically the slowest to clear, whether that is a lender’s final approval, a landlord’s consent to assign the lease, or a regulator’s licence transfer, and then building in some buffer, rather than picking a date first and expecting financing, consents and diligence to simply keep pace with it.
- Is the seller required to help after the sale closes?No obligation to help after closing exists unless the purchase agreement, a consulting agreement, or an employment agreement actually creates one — without a signed document, whatever cooperation a seller gives afterward is goodwill, not a contractual duty the buyer can enforce.
- Does a transition period need to be in writing?A transition period does not need to be in writing to happen informally, but it needs to be in writing to be enforceable — without a signed consulting agreement, employment agreement, or a schedule attached to the purchase agreement, neither side has a real remedy if the other stops following through.
- Is employment standards legislation the same in every province?No — employment standards legislation is set province by province, so Ontario’s Employment Standards Act is only one of several statutes across Canada, each with its own rules on notice, continuity of employment and entitlements, and a federally regulated business falls under the Canada Labour Code instead of any provincial statute at all.
- What happens to customer deposits when a business is sold?Customer deposits are a liability on the business’s books, and who owes them after a sale depends on deal structure — in a share sale the same corporation keeps owing the money it already collected, while in an asset sale the purchase agreement has to say explicitly whether the buyer is assuming that liability or the seller is refunding it before closing.
- What does a seller remain responsible for after selling?A seller commonly remains on the hook, after closing, for indemnity claims within the survival period the purchase agreement sets, for any restrictive covenant like a non-compete they agreed to, for personal guarantees on leases or loans that were not formally released or replaced, and for their own tax filings for the period they owned the business — none of which end automatically just because the sale has closed.
- What happens if the seller does not follow through on transition support?What a buyer can actually do depends entirely on whether the transition support was ever put in writing — if it was documented in a consulting agreement, an employment agreement, or a schedule to the purchase agreement, the buyer has a real breach claim and potentially leverage through an unreleased holdback, but if it was only a verbal understanding, the buyer generally has no enforceable remedy at all.
Checklists
- Landlord consent checklistA landlord consent checklist for a Canadian business purchase covers the practical steps to secure the actual consent — assembling a request package, submitting it on the lease’s required notice, negotiating what the landlord wants in exchange, and getting the consent and any estoppel certificate in writing — distinct from reviewing the lease document itself for its assignment terms.
- Closing day checklistA closing day checklist for a Canadian business sale covers the documents that get signed, how funds actually move, the final adjustments made on the day, and the handover items a buyer needs in hand before operations change over to new ownership.
- Licence and permit transfer checklistA licence and permit transfer checklist for a Canadian business sale covers identifying which licences a business holds, confirming whether each one transfers or needs reapplication, and building regulator timelines into the closing schedule, using Ontario’s AGCO, CVOR and WSIB processes as examples of how varied these transfers can be.
- Intellectual property checklist for a business saleAn intellectual property checklist for a Canadian business sale covers confirming who actually owns the trademarks, domain names, copyrighted material and trade secrets a business relies on, whether registrations are current, and whether every person who ever created that material signed a written assignment to the company — the gaps that most often surface only after a buyer starts asking questions.
- Permits and licences renewal checklistA permits and licences renewal checklist helps a Canadian business owner track which licences and permits are approaching renewal, what each renewal actually requires, and what happens if one lapses — the ongoing housekeeping that keeps a business compliant year-round and, when a sale eventually comes, keeps a licence transfer from being complicated by an expired underlying licence.
- Seller disclosure checklistA seller disclosure checklist for a Canadian business sale covers what a seller should proactively tell a buyer about the business — material contracts, litigation, environmental issues, employee disputes and related-party dealings — and how that disclosure gets documented, since what is properly disclosed generally cannot later become the basis of a claim that the seller misrepresented the business.
Comparisons
- Lawyer vs notary in a Quebec business dealIn a Quebec business sale, a lawyer typically negotiates and drafts the purchase agreement and can represent one side’s interests in a dispute, while a notary acts impartially for all parties and holds the distinct authority to prepare authentic acts — most often needed when real property or a hypothec is part of the transaction.
- Buying a business with a partner vs aloneBuying alone keeps full control and full financial responsibility with one person, while buying with a partner pools capital and skills but requires a shareholders’ agreement — covering roles, decision-making, deadlock and exit — settled before closing, which is where most partnerships that later fail actually went wrong.
- Vendor take-back vs earn-outA vendor take-back is deferred purchase price — a fixed, already-agreed amount the seller finances through a promissory note repaid on a set schedule — while an earn-out is contingent consideration, an amount that is not fixed at all and is only paid if the business hits agreed targets after closing. One is a loan with a known balance; the other is a bet on the future that may pay nothing.
- LOI vs term sheetA letter of intent is written as a narrative statement of two parties’ shared intent to proceed on agreed terms, while a term sheet lays out the same kind of deal terms as a structured list without that narrative framing; the two labels are often used interchangeably in Canadian practice, and neither one decides which clauses actually bind the parties — the drafting does.
- Letter of intent vs purchase agreementA letter of intent sketches the main terms both sides have agreed to in principle, largely non-binding, before either party has fully verified the business, while the purchase agreement is the fully binding contract negotiated afterward, once due diligence is substantially complete, that actually governs the closing — and whatever the letter of intent left vague usually becomes the hardest thing to settle later.
- Deposit vs escrowA deposit is a specific sum a buyer pays, typically on signing the definitive agreement, to demonstrate commitment to the deal, while escrow is the neutral third-party arrangement that can hold that deposit — and much else besides, including a post-closing holdback or documents pending a condition — until the release terms both sides agreed to are actually met.
- Representations and warranties vs indemnitiesRepresentations and warranties are the seller’s contractual statements of fact about the business, while an indemnity is the separate promise to pay if one of those statements — or a specific named risk identified during diligence — turns out to be wrong or actually happens, and a deal can lean heavily on either one without the other doing very much work at all.
- Non-compete vs non-solicitA non-compete bars a seller from operating a competing business at all within a defined scope, while a non-solicit only bars approaching the specific customers, staff or suppliers named in it — a narrower restriction Canadian courts generally scrutinize less strictly, though how either is treated depends on the exact wording, the province, and whether it was given on a business sale or in employment.
- Earn-out vs holdbackAn earn-out pays the seller additional money after closing, calculated from how the business actually performs once the buyer owns it, while a holdback sets aside part of the price already agreed on at closing to cover claims the buyer might later bring against the seller — one is contingent upside, the other is contingent security.
Definitions
- Closing condition (condition precedent)A closing condition, or condition precedent, is something that must be satisfied or waived before a party is obliged to complete the transaction. If a condition is not met by the deadline, the party it protects can usually walk away without penalty.
- Disclosure scheduleA disclosure schedule is the annex to a purchase agreement in which the seller lists the specific exceptions to the representations and warranties they are giving. A properly disclosed exception cannot later be the basis of a claim for breach of that representation.
- IndemnityAn indemnity is a contractual promise by one party to compensate the other for defined losses. In a business sale it is the mechanism that turns a breached representation into an actual payment, without the buyer having to prove a damages claim from scratch.
- Material adverse change (MAC)A material adverse change clause allows a buyer to refuse to close if the business suffers a serious, adverse change between signing and closing. It exists because time passes between the two, and the buyer priced the business as it was when they signed.
- Survival periodThe survival period is the window after closing during which a buyer may still bring a claim for breach of a representation or warranty. Once it expires, the representation stops providing any protection, however serious the breach turns out to be.
- Funds flow statementA funds flow statement is the schedule setting out every payment made on closing day — who sends what amount to whom, in what order, and from which account. It converts a purchase price into the actual wires that have to leave the right accounts at the right time.
- Share purchase agreement (SPA)A share purchase agreement (SPA) is the contract buyers and sellers sign to transfer ownership of a company by selling its shares. The buyer takes over the corporation as-is, including its assets, contracts and liabilities, subject to whatever protections the SPA negotiates.
- Asset purchase agreement (APA)An asset purchase agreement (APA) is the contract used when a buyer acquires specific assets and liabilities of a business rather than buying the corporation’s shares. The seller’s company keeps existing and keeps anything not listed, while the buyer picks up only what the APA describes.
- Corporate minute bookA corporate minute book is the company’s legal record book. It holds the articles of incorporation, bylaws, director and shareholder resolutions, share registers, and any shareholder agreements. Buyers and lenders review it to confirm a company was properly governed and its shares were validly issued.
- Directors’ resolutionA directors’ resolution is a written record showing that a company’s board of directors approved a specific decision, such as declaring a dividend, approving a sale, or appointing an officer. It can be passed at a meeting or signed by all directors without a meeting, depending on the company’s bylaws.
- Shareholder agreementA shareholder agreement is a private contract among some or all of a company’s shareholders. It sets out how decisions get made, how shares can be sold or transferred, what happens if a shareholder dies, retires or wants out, and how disputes between owners are resolved.
- Unanimous shareholder agreement (USA)A unanimous shareholder agreement (USA) is signed by every shareholder of a company and can restrict or remove the powers directors would otherwise have, transferring those powers and responsibilities to the shareholders instead. It is a more formal tool than a regular shareholder agreement, with effects set out in corporate statutes.
- Drag-along rightA drag-along right allows shareholders who hold enough shares, usually a defined majority, to force the remaining shareholders to sell their shares on the same terms if the majority agrees to sell the company. It exists so a buyer can acquire all the shares even if a small holder refuses to sell.
- Tag-along rightA tag-along right lets a minority shareholder join a sale that a majority shareholder is making, selling their own shares to the same buyer on the same price and terms instead of being left behind as a minority owner in whatever remains of the company.
- Right of first refusal (ROFR)A right of first refusal (ROFR) requires a shareholder who wants to sell their shares to first offer them to the other shareholders, or to the company, on the same price and terms an outside buyer proposed. Only if they decline can the shares be sold to the outsider.
- AmalgamationAn amalgamation is a statutory process that merges two or more corporations into a single continuing corporation, which automatically takes on the assets, liabilities and obligations of the companies that combined. It is a common way to restructure related companies, including after one company buys another’s shares.
- OpcoAn opco, short for operating company, is the corporation that actually carries on a business — hiring staff, signing customer contracts and taking on operational risk. It is often paired with a separate holdco that owns the opco’s shares but keeps investments and surplus cash out of reach of the opco’s creditors.
- Share classA share class is a defined category of shares in a corporation, each with its own combination of rights: whether it votes, whether it receives dividends, and what it is entitled to if the company is sold or wound up. A single corporation can have several classes with very different rights.
- Dissent rightsDissent rights let a shareholder who votes against certain major corporate changes, such as an amalgamation or a sale of substantially all the company’s assets, demand that the company buy back their shares for fair value instead of being forced to go along with the change.
- Articles of incorporationArticles of incorporation are the document filed with a government corporate registry to legally create a corporation. They set the company’s name, the classes of shares it can issue, any restrictions on its business or share transfers, and other foundational rules the corporation operates under.
- Corporate good standingCorporate good standing means a company has kept its filings and fees current with the government registry that governs it, so it is not in default and remains a validly existing corporation. Buyers, lenders and landlords often ask for a certificate of status confirming this before completing a transaction.
- Exclusivity (no-shop) clauseAn exclusivity clause, also called a no-shop clause, is a promise in a letter of intent that the seller will stop marketing the business and negotiating with other buyers for a set period, usually while due diligence and the definitive agreement are being finalized.
- Break feeA break fee is a payment one party agrees to make to the other if it walks away from a deal after a certain point without a permitted reason, usually to cover the other side’s due diligence and legal costs. In small business sales they are uncommon but sometimes negotiated for larger or more complex deals.
- Definitive purchase agreementA definitive purchase agreement is the binding contract that governs a business sale, replacing the earlier non-binding letter of intent. It sets out the final price, structure, representations and warranties, closing conditions, and what happens after closing, and it is the document both parties actually sign to complete the transaction.
- Closing dateThe closing date is the day ownership of the business legally transfers from seller to buyer, once every closing condition in the definitive agreement has been satisfied and the purchase price has been paid. It is set in the agreement but frequently shifts as conditions take longer to satisfy than expected.
- Escrow agentAn escrow agent is a neutral third party, often a lawyer or trust company, who holds money or documents on behalf of a buyer and seller until specific conditions in the deal are satisfied. Once those conditions are met, the escrow agent releases the funds or documents according to the agreement’s instructions.
- Bring-down certificateA bring-down certificate is a document the seller signs at closing confirming that the representations and warranties made in the definitive agreement remain true as of the closing date, not just when the agreement was originally signed. It gives the buyer a fresh, dated confirmation immediately before ownership actually changes hands.
- Asset saleAn asset sale is a transaction where the buyer purchases specific assets of a business — equipment, inventory, goodwill, contracts — rather than the shares of the company that owns them. The seller keeps the corporation, and with it most of the company’s history and liabilities.
- Share saleA share sale is a transaction where the buyer purchases the shares of the corporation that carries on the business, acquiring the company whole — assets, contracts, and liabilities together. The business itself does not change hands; its ownership does.
- Earn-outAn earn-out is a portion of the purchase price paid only if the business hits agreed targets after closing. It is used to bridge disagreement about what a business is worth: the seller believes the earnings will continue, the buyer is not certain, and the earn-out lets the outcome decide.
- Holdback (escrow)A holdback is a portion of the purchase price kept back at closing — often in escrow with a lawyer — and released later once agreed conditions are met or a claim period expires. It exists so a buyer has something to recover against if a seller’s representations turn out to be wrong.
- Working capital pegA working capital peg is an agreed target level of working capital — receivables, inventory and prepaid expenses, less payables — that must be in the business on closing day. If actual working capital lands above or below the peg, the purchase price is adjusted after closing to make up the difference.
- Successor employerA successor employer is a buyer who continues a business and, by operation of employment standards legislation, is treated as continuing the employment relationship rather than starting a new one. Employees carry their accumulated length of service across to the buyer even in an asset sale where they are technically rehired.
- Continuity of serviceContinuity of service means an employee’s accumulated length of employment carries forward through a change of business ownership rather than resetting. It determines notice, termination pay, severance and vacation entitlements, all of which increase with tenure.
- Key employee retention agreementA key employee retention agreement is a contract that pays a named employee a bonus for remaining with the business through a transaction and for a defined period afterwards. It protects the buyer against losing the people the business actually depends on at the moment of handover.
- Collective agreementA collective agreement is the contract between an employer and a union covering unionised employees. Labour legislation across Canada generally provides that where a business is sold as a going concern, the collective agreement and the union’s bargaining rights bind the buyer — in an asset sale as well as a share sale.
- Non-solicitation clauseA non-solicitation clause prevents a person from approaching a business’s customers, suppliers or employees for a defined period. It is narrower than a non-compete, because it restricts who someone may contact rather than whether they may work in the industry at all.
- Patient records transferPatient records belong to a regulated custodian, not to the practice itself, so ownership does not automatically pass in a sale. Patients generally must be notified of the change and given a chance to have their file sent elsewhere, and the buyer typically has to qualify as an eligible custodian before records change hands.
- Liquor licence transferA liquor licence does not automatically pass to a new owner when a bar, restaurant or retail store changes hands. In Ontario, the AGCO generally requires a fresh application or a formal transfer process before the new owner can legally sell alcohol, and the business typically cannot serve liquor under the old licence once ownership changes.
- Food premises permitA food premises permit is the local public health authorisation that allows a restaurant, café or food retailer to prepare and serve food to the public, and it is generally tied to the specific operator and location rather than the business itself. A change of ownership typically requires the new owner to apply for their own permit before opening.
- CVOR certificateA CVOR certificate is the Ontario registration that lets a business operate commercial trucks or buses over a certain weight or seating threshold, and it is issued to a specific operator rather than to the vehicles or the business name. It generally does not transfer automatically when a trucking business is sold.
- NSC safety fitness certificateAn NSC safety fitness certificate confirms a commercial carrier meets the National Safety Code, the Canada-wide framework for trucking and bus safety that every province administers through its own system — CVOR in Ontario, for example. It reflects the carrier’s own compliance record, so a buyer generally cannot simply carry an existing rating over to a new operating entity.
- Motor vehicle dealer registrationIn Ontario, anyone who buys and sells motor vehicles as a business — including a used car dealership — generally has to be registered with OMVIC, the province’s motor vehicle dealer regulator. Registration is tied to the individual and the dealership entity, so a buyer acquiring a dealership typically needs its own registration rather than inheriting the seller’s.
- Construction holdbackA construction holdback is the portion of payment — generally a percentage set by provincial construction lien legislation — that an owner or contractor must retain for a set period after work is done, to cover potential lien claims from subcontractors or suppliers. In a business sale involving construction contracts, unreleased holdbacks are amounts the buyer typically has to account for.
- IP assignmentAn IP assignment is the document that formally transfers ownership of intellectual property — trademarks, patents, copyright or trade secrets — from one party to another, and it is what actually moves ownership in a deal rather than the purchase agreement alone. It matters most where IP was created by founders, contractors or employees who may not have automatically assigned it to the company.
- Specific performanceSpecific performance is a remedy where a court orders a party to actually complete the transaction — close the sale, transfer the shares or assets — rather than simply pay money damages for breaching the agreement. Canadian courts grant it only when they decide damages would not adequately compensate the other side.
- Liquidated damagesLiquidated damages are a pre-agreed amount, written into the purchase agreement, that a party is owed if the other side commits a specific breach — most often walking away from a signed deal. The point is to avoid having to prove the actual dollar loss in court after the fact.
- Indemnity capAn indemnity cap is the maximum amount one party — usually the seller — can be required to pay the other under the purchase agreement’s indemnity provisions, most often for breaches of representations and warranties discovered after closing. It sets the outer limit of post-closing financial exposure on the deal.
- Basket and de minimisA de minimis threshold screens out any individual indemnity claim too small to count at all, and a basket is the cumulative amount of qualifying claims that must accumulate before the indemnifying party has to pay anything. Together they keep small, disputable amounts out of a business sale’s post-closing claims process.
- Knowledge qualifierA knowledge qualifier is language added to a representation in a purchase agreement — such as "to the Seller’s knowledge" — that limits how much the seller is guaranteeing to what they actually knew, rather than making an absolute statement of fact regardless of awareness. It shifts risk for undiscovered problems toward the buyer.
- SandbaggingSandbagging describes a buyer bringing an indemnity claim after closing for a breach of a representation or warranty that the buyer already knew about, or discovered during due diligence, before the deal closed. Whether that claim can still succeed depends on how — or whether — the purchase agreement addresses it.
- Assignment clauseAn assignment clause is the contract provision that controls whether, and under what conditions, a party can transfer its rights and obligations under that contract to someone else — usually requiring the other party’s written consent. It decides whether a key contract can actually move with the business in a sale.
- Change-of-control clauseA change-of-control clause is a contract provision that treats a shift in who owns or controls a company as a triggering event — allowing termination, consent, or an acceleration right — even though the company itself has not transferred any assets. It most often appears in leases, loan agreements and franchise or supplier contracts.
- NovationNovation is the process of substituting a new party into an existing contract in place of one of the original parties, with the consent of everyone involved, so that the original party is fully released and the new party effectively steps into the same agreement in their place. It requires agreement from all sides, not just a transfer by the departing party.
- Force majeureForce majeure is a contract clause — or, in Quebec, a codified legal doctrine — that excuses a party from performing its obligations when an extraordinary event genuinely outside anyone’s control makes performance impossible, such as a natural disaster, war, or a pandemic-scale disruption. It does not excuse performance that is merely harder or less profitable.
- Entire agreement clauseAn entire agreement clause — sometimes called an integration or merger clause — states that the signed contract is the complete and final agreement between the parties, superseding earlier drafts, term sheets, emails and verbal discussions on the same subject. Once it is signed, promises made outside the document generally stop mattering.
- SeverabilityA severability clause states that if a court finds one provision of a contract unenforceable, the rest of the agreement remains in effect rather than the whole contract collapsing. It is a safety net that limits the damage from a single bad clause, and it is tested most often by an overreaching restrictive covenant.
- Governing law clauseA governing law clause specifies which province’s — or country’s — body of law will be used to interpret and enforce a contract, regardless of where any dispute over it ends up being heard. It is a choice of substantive legal rules, not a choice of courthouse.
- Arbitration clauseAn arbitration clause requires disputes arising from the contract to be resolved through private arbitration by an arbitrator or panel, instead of through the public court system. It trades the courts’ procedures and public record for a process the parties themselves largely design.
- Restrictive covenantA restrictive covenant is the umbrella term for contractual promises restricting what a person can do after a deal closes — non-competition, non-solicitation and non-disparagement clauses are all restrictive covenants. In a business sale, they are what actually protects the goodwill the buyer just paid for.
- Garden leaveGarden leave is an arrangement where a departing party — often a key employee, or a seller staying on temporarily after a sale — continues to be paid and bound by their existing duties, but is kept away from actually working day to day, usually during a notice or transition period. It manages the awkward stretch between announcement and departure.
- Shotgun clauseA shotgun clause is a buy-sell mechanism in a shareholder agreement where one owner offers to buy out the other at a price of their choosing, and the other owner must either sell at that price or turn around and buy the first owner out at the exact same price. It is one of the most common deadlock-breakers in a two-owner Canadian corporation.
- Pre-emptive rightA pre-emptive right is a shareholder’s right to be offered a proportional share of any new shares the company issues, before those shares are offered to an outsider, so an existing owner can maintain their percentage stake in the company. It protects against dilution from a share issuance the shareholder had no say in.
- Bulk sales legislationBulk sales legislation historically protected a business’s unsecured creditors when the business sold most of its inventory or assets in a single transaction, typically by requiring the seller to disclose its creditors and, in some versions, hold back part of the sale proceeds to pay them. Whether such legislation still applies today depends on the province.
- Beneficial ownership registerA beneficial ownership register is a corporate record identifying the individuals who actually own or control a corporation, even where that control sits behind holding companies, trusts or nominee shareholders. Canadian corporations are increasingly required by law to maintain one, and in some cases to report it to a government registry.
- Franchise transferA franchise transfer is the sale of a franchised business to a new franchisee. Because the franchise agreement is a contract with the franchisor, virtually every one requires the franchisor’s consent — and the franchisor sets the conditions on which that consent is given.
- Closing checklistA closing checklist is the master list of every document, signature, payment and consent a business sale needs before the deal can complete — condition satisfaction, corporate approvals, funds flow, licence transfers and insurance in force. Whoever holds the working version is effectively running the closing.
- Escrow releaseAn escrow release is the payment of some or all of a holdback out of escrow to the seller once the conditions for releasing it have been met — typically the survival period expiring with no outstanding claim, or a claim being resolved. Until release, the funds are the buyer’s main practical protection.
- Transition services agreement (TSA)A transition services agreement is a separate contract, signed alongside the purchase agreement, in which the seller agrees to keep providing specific support — bookkeeping, IT, a key relationship, use of a shared system — for a defined period after closing. It exists because some functions cannot simply be handed over on closing day.
- Payroll transferA payroll transfer is moving employees onto the buyer’s payroll system as of closing — new payroll account, continuity of pay and deductions, and, in an asset sale, correctly treating employment as continuing rather than as a termination and rehire. Getting the mechanics wrong can trigger notice or severance obligations that a share sale would not create.
- Licence re-applicationLicence re-application is applying for a business licence or regulatory registration in the buyer’s own name rather than assuming an existing one carries over, because most licences, permits and registrations are issued to a specific person or entity and do not automatically transfer with a change of ownership. Missing this step can leave a business unable to legally operate on day one.
- Minute book updateA minute book update is bringing a corporation’s official record — directors, officers, shareholders, resolutions, share certificates — current to reflect a sale, right after closing. Buyers who acquire shares are relying on that record being accurate, and a stale or incomplete minute book is one of the more common problems found in diligence on the next sale.
- Post-closing disputeA post-closing dispute is a disagreement that arises after a business sale has completed, commonly over a working capital true-up, an indemnity claim for breach of a representation, or an escrow release, resolved through whatever mechanism the purchase agreement specifies, from direct negotiation to arbitration or litigation. Most are contained by the agreement’s own terms rather than ending up in court.
- Non-disclosure agreement (NDA)A non-disclosure agreement is a contract in which a prospective buyer agrees to keep a seller’s confidential information private and to use it only to evaluate the purchase. It is the first document in almost every business sale, because a seller cannot show real financials to a stranger without one.
- Letter of intent (LOI)A letter of intent is a document setting out the main commercial terms both sides have agreed in principle — price, structure, timeline and conditions — before lawyers draft the binding purchase agreement. Most of an LOI is deliberately non-binding, but specific clauses within it usually are.
- Representations and warrantiesRepresentations and warranties are statements of fact a seller makes in the purchase agreement about the business — that the financial statements are accurate, that taxes are filed, that there is no undisclosed litigation. If one proves untrue, the buyer has a contractual claim, usually backed by an indemnity.
- Non-compete (restrictive covenant)A non-compete, or restrictive covenant, is the seller’s promise not to compete with the business they have just sold, for a defined time and within a defined area. Without one, a buyer has paid for goodwill the seller could immediately rebuild across the street.
- Lease assignmentA lease assignment transfers a commercial lease from the seller to the buyer, so the buyer takes over the existing lease on its existing terms. Almost every commercial lease requires the landlord’s consent to assign, which makes the landlord an unavoidable third party in the transaction.
Ready to act on it?
Browse Canadian businesses for sale, or get a free value range for your own.