What you need to know about the Purchase and Sale of Business in Manitoba
A business sale would typically involve the following steps:
- Expression of Interest
At this point, the prospective seller and buyer have their initial discussions about the basic terms of the transaction. The expression of interest can also be done through a letter of intent which sets out the basic terms and conditions of the proposed transactions. The terms and conditions set out in the letter of intent will inform the terms of the agreement of purchase and sale.
The letter of intent will also set out whether the prospective purchaser is purchasing just the assets of the business, just the shares of the business or both assets and shares of the business. - Due Diligence
Typically, at this stage, legal due diligence is carried out to determine potential liabilities which will inform whether the purchase of the business is beneficial or not. The legal due diligence involves the review of by-laws, minute books, resolutions, organizational proceedings, reviews and confirmations of lease terms, reviews of material contracts, reviews of loan agreements, etc. — Some searches will also be carried out such as corporate searches, title searches and searches to determine security interests held by others. Searches are done to ensure that the seller owns the shares or assets being sold and that they are free from all encumbrances other than those that the proposed buyer may have agreed to assume and, in the case of a share purchase, that the shares being purchased have been duly allotted and issued, are fully paid and otherwise unencumbered. - The Agreement of Purchase and Sale
Once the prospective buyer has decided to proceed with the deal, the next thing is to prepare the Agreement of Purchase and Sale. - Ancillary Closing Documents
Parties through their counsel must draw up the number of ancillary documents required to close the transaction. For example, requisite resolutions authorizing the sale, where a real estate property is involved, the necessary conveyancing documents or where there is an existing lease, the assignment of the lease together with the lessor’s consent. - Closing Responsibilities
At this point, both lawyers agree on actions to be taken and who is saddled with such responsibilities. For example, registrations to be completed, taxes to be paid, and discharge of mortgages among others. - Closing
Following the closing date agreed upon by the buyer and seller, both parties come together to sign the agreement of purchase and sale. The buyer will usually pay the seller on this day.
Does this look like a lot, not to worry at F.Taiwo Law Office we will help you simplify the process.Disclaimer
This article is presented for informational purposes only. The content does not constitute legal advice or solicitation nor does it create a solicitor-client relationship. The opinions stated are exclusively the writers’ and should not be attributed to any other party, including F.Taiwo Law Office or its clients. The writers make no assurances regarding the accuracy or adequacy of the information in this article. If you are seeking legal advice, please contact Funmi Taiwo at ft@ftaiwolaw.ca. We would be pleased to provide you with our assistance on any issues raised in this article.
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