1000 plain-language Q&As about Ontario business purchase and sale. Browse below, or search the whole library.
Selling a single franchised retail location isn't simply a business asset sale; it's also a franchise transfer, and the franchisor's rights over its…
Read the full answer →Often yes, but not in every case — this is one of the more fact-specific questions in franchise resales, and it should never be assumed either way. The…
Read the full answer →This is a real and fairly common timing collision, since franchisor approval processes and a buyer's lender financing commitment both run on their own…
Read the full answer →Generally, a franchisor's consent right is focused on approving the buyer as a qualified franchisee, not on approving or vetoing the price you've…
Read the full answer →Not entirely without limit, though franchisors generally have considerably more contractual room to set a transfer fee than a general "reasonableness"…
Read the full answer →This generally comes down to whether your franchise agreement actually contains a buy-back or right-of-first-refusal provision — a franchisor cannot…
Read the full answer →Realistically, yes — a franchisor who drags out approval, whether deliberately or simply due to internal process, can exhaust a buyer's patience or…
Read the full answer →Generally only if your franchise agreement actually gives them that right — a franchisor can't simply invent an entitlement to a cut of your sale price…
Read the full answer →Generally yes, if your franchise agreement's transfer provisions make training completion a condition of approving a new franchisee, which is extremely…
Read the full answer →Often yes, particularly where your franchise agreement's transfer provisions give the franchisor discretion to require the location be brought up to…
Read the full answer →Generally yes, and this is usually treated as one of the more clearly legitimate grounds a franchisor can rely on. Franchisors have a genuine interest…
Read the full answer →If your franchise agreement contains a right of first refusal, then yes, that's generally exactly what it's designed to do — it gives the franchisor…
Read the full answer →Generally, no — but how much room a franchisor actually has depends heavily on your specific franchise agreement's transfer provisions. Franchise…
Read the full answer →A slow franchisor response is a real and common risk in franchise resales, and how it plays out depends on what your franchise agreement says about…
Read the full answer →This depends on whether the franchisor actually has independent grounds to terminate under your agreement, separate from the transfer request itself —…
Read the full answer →Franchisors sometimes do treat a transfer as an opportunity to update the franchise agreement to their current standard template, and whether this is…
Read the full answer →It depends on exactly how the holdback's release mechanics are drafted, since agreements differ on this point. Many holdback provisions are designed to…
Read the full answer →There is no legal rule setting the cap for fundamental representations, so whether they get a higher limit than the general business representations…
Read the full answer →It can, depending on exactly how the continuous operation clause is worded and how long the gap actually is. Many commercial leases — especially in…
Read the full answer →If a new owner's liquor licence approval isn't in place by the time the sale closes and the seller's licence stops applying, there can be a real gap…
Read the full answer →Yes, financing a receivership purchase is common, and lenders are generally comfortable with these transactions once they understand the process,…
Read the full answer →Ordinarily, yes — possession is meant to happen the same day funds are released, and lawyers on both sides generally coordinate the exchange so the…
Read the full answer →This depends heavily on timing. If you discover this before closing, the question is whether it triggers an existing closing condition or a…
Read the full answer →Potentially, though the practical value of "getting out" depends on what you're actually trying to escape. If the core deal terms in your LOI were…
Read the full answer →It depends on whether the problem you've found ties to something the agreement actually gives you a right to act on. Two main paths exist before…
Read the full answer →Yes, and this is a step owners often leave until after a deal is already shaped, when it's harder to act on. How a sale is structured — a share sale…
Read the full answer →Outstanding gift cards and store credit represent real obligations to customers, and they don't disappear just because the business is sold; how…
Read the full answer →Yes, structuring a transition as part gift and part sale is a common and legitimate approach, and it can make a business more affordable for a child…
Read the full answer →Yes, generally, if the purchase agreement or a related document included a personal guarantee — commonly from the principal behind a corporate seller —…
Read the full answer →You can have direct conversations with a buyer, but doing so to avoid your broker's involvement — or to avoid commission on a sale to a buyer they…
Read the full answer →Yes, generally. A general security agreement registered under Ontario's Personal Property Security Act typically includes "after-acquired property"…
Read the full answer →Generally, not much, if the purchase agreement contains an "entire agreement" clause, which most do — this kind of clause states that the written…
Read the full answer →Generally, no. Price is exactly the kind of term LOIs for a business purchase and sale are typically drafted to leave non-binding, precisely because…
Read the full answer →It can, if you buy the equipment without checking for and clearing an existing registered security interest against it. In Ontario, security interests…
Read the full answer →It depends heavily on how your deal is structured. In a share sale, warranty obligations owed by the corporation to past customers generally come with…
Read the full answer →There is no fixed rule dictating what a buyer receives in exchange for agreeing to a higher basket threshold, since the indemnity section of a purchase…
Read the full answer →It depends on the stage of the process. Many receivership sales use a court-approved bidding process, sometimes structured with an initial "stalking…
Read the full answer →Often, yes — if the business currently depends heavily on you personally, bringing in a manager before you sell can materially improve both how buyers…
Read the full answer →Potentially, yes. A broker acting on your behalf is expected to present your business accurately, based on information you've provided and reasonable…
Read the full answer →Courts can, in limited and genuinely exceptional circumstances, grant an urgent order — sometimes called a freezing order — to stop a party from moving…
Read the full answer →Yes, and this is a common and sensible request in a business purchase and sale where the buyer is worried about pre-closing tax exposure. There is no…
Read the full answer →Partially, and only if the lender does not also require a personal guarantee, which is common for a newly formed acquisition vehicle. Borrowing through…
Read the full answer →Generally no, if the house is a matrimonial home under Ontario's Family Law Act. That Act restricts one spouse from mortgaging, encumbering, or…
Read the full answer →The financial statements alone won't tell you — inventory value on a balance sheet is a number, not a physical confirmation, and it's one of the easier…
Read the full answer →There's no fixed legal rule dictating how many years of financial records you must review before making an offer — it's a matter of prudent due…
Read the full answer →Money in a business purchase and sale almost always moves lawyer-to-lawyer through trust accounts, not directly between buyer and seller. The buyer's…
Read the full answer →Ask directly for examples: how many businesses in your general industry or size range they've sold recently, and what happened with those deals. A…
Read the full answer →A business is sellable if a buyer can reasonably expect to keep it running and profitable after you leave, and the honest way to test that is to look…
Read the full answer →Cash-heavy businesses are the hardest to verify, and a seller motivated to show strong numbers has an obvious incentive to inflate them. There's no…
Read the full answer →Start with the basics: ask about their track record with businesses similar to yours, request references, and ask specifically how they handle…
Read the full answer →Signing a letter of intent (LOI) doesn't usually commit you to actually selling. Most LOIs for a business purchase and sale are drafted so the core…
Read the full answer →Yes — an explicit unilateral right to walk away, sometimes drafted as a broad termination right requiring no cause at all, can absolutely be negotiated…
Read the full answer →Both approaches show up in Ontario business sales, and there is no legal rule requiring either — the cap is simply whatever the buyer and seller…
Read the full answer →Often yes, though it depends on what happened to the buyer's rights under the original purchase agreement when the business was resold. If the buyer's…
Read the full answer →It becomes considerably harder, but not necessarily impossible. Once a corporation is dissolved, it generally ceases to exist as a legal person, which…
Read the full answer →A well-drafted indemnity clause in an Ontario purchase agreement typically covers both, but treats them somewhat differently in how a claim is actually…
Read the full answer →Usually yes, if the purchase agreement includes the kind of anti-double-recovery language that most Ontario agreements do. It is common to require that…
Read the full answer →Generally yes. Under Ontario and federal corporate law, an amalgamation is treated as a continuation of the amalgamating corporations rather than the…
Read the full answer →The claim itself generally survives as a legal right, but its practical value can be sharply reduced. If a seller who personally guaranteed…
Read the full answer →This is a common and serious timing risk, since regulatory licensing processes generally run on their own schedule and have little regard for a deal's…
Read the full answer →Yes, this is a real possibility, and it's closely tied to whether you're found to have stepped into the seller's shoes as the employer for labour…
Read the full answer →For Employment Standards Act purposes, generally yes — if you've hired the employee as part of a going-concern business sale, their statutory…
Read the full answer →It depends on your deal structure, but there's an important ongoing dimension here separate from historical liability. In a share purchase, generally…
Read the full answer →It depends on your deal structure, and this is a liability worth quantifying specifically rather than treating as a footnote. In a share sale, the…
Read the full answer →In a share purchase, yes — the corporation is bound by the employment contracts it entered into, whether or not you personally ever saw or signed them,…
Read the full answer →Yes — in an asset purchase, a buyer generally has no statutory obligation to hire any of the seller's employees, which means you can choose to make…
Read the full answer →Yes, and doing so is one of the most important protections available in a distressed purchase. A vesting order is a court order approving the sale and…
Read the full answer →Often, yes, at least in practical terms, even where it isn't framed as formal "approval" of the sale itself. Brokerages typically operate under agency…
Read the full answer →This depends entirely on the specific termination language written into the intercreditor, or subordination, agreement itself, rather than any…
Read the full answer →A deliberately inflated inventory count is a strong candidate for both an indemnity claim, since inventory value typically feeds directly into the…
Read the full answer →Yes, quite differently. Inventory sold as part of a business is generally treated as a sale in the ordinary course of business for tax purposes, so the…
Read the full answer →An informal handshake understanding, before anything is put in writing, generally carries very little legal weight for the sale itself in a transaction…
Read the full answer →Yes, tail (or holdover) clauses are a standard feature of most business-sale listing agreements, not an unusual add-on to be suspicious of. The purpose…
Read the full answer →It helps, but it isn't foolproof, and it's worth understanding the limits before relying on it completely. A blind or anonymized listing typically…
Read the full answer →Usually, yes — an exclusivity clause tied to a defined period generally ends when that period does, without needing any further step from either side,…
Read the full answer →Generally, yes, unless that friend's business is genuinely comparable to yours in industry, size, financial performance, and risk profile, which is a…
Read the full answer →Yes, and it's one of the more common ways sellers unintentionally weaken their own negotiating position. An asking price that you can't walk through —…
Read the full answer →It's a legitimate negotiating position, even if it doesn't feel fair from where you're sitting. A buyer isn't just purchasing today's earnings —…
Read the full answer →Some disagreement is normal — valuation involves professional judgment, not just plugging numbers into a formula, so two qualified valuators can…
Read the full answer →It can be, but a business that's currently losing money is a different kind of sale than a profitable one, and it helps to be realistic about that…
Read the full answer →It's a common and understandable negotiating position from the buyer's side, even if "reasonable" is ultimately your call to make. A buyer who senses…
Read the full answer →It depends on what the payment is actually characterized as, which is a federal income tax question governed by the Income Tax Act rather than…
Read the full answer →Whether a deposit is at risk in this situation depends entirely on how the deposit terms were actually drafted, not on how fair or unfair the buyer's…
Read the full answer →Yes — a recapitalization, where you sell a significant stake (often a majority) while keeping some ownership and typically staying involved in the…
Read the full answer →Yes — there isn't one single "right" way to announce a possible sale, but there are clearly worse ways, and most of them come down to timing and…
Read the full answer →It offers some protection, but it's considerably weaker than a written agreement, and not something to rely on for anything genuinely sensitive. A…
Read the full answer →Sometimes, yes. Winding down can be the more sensible choice when the business has little value to anyone else beyond its individual assets — for…
Read the full answer →Usually not, if the non-solicitation clause is written the way most are. Non-solicitation covenants typically prohibit actively and directly…
Read the full answer →Generally, no. Deposit forfeiture or retention terms are typically tied to the other side's default, not your own — a deposit clause is usually written…
Read the full answer →This depends on whether the purchase agreement contained a representation touching on customer relationships — commonly something like no known…
Read the full answer →Legally, yes — nothing automatically stops a key developer from resigning after a sale closes, and the code itself (assuming ownership was properly…
Read the full answer →It depends on the deal structure. In a share sale, this generally isn't an issue, because the corporation that holds the contract doesn't change —…
Read the full answer →There's no fixed formula for this, but the question is usually better answered by looking at trajectory than by picking a number of years in advance.…
Read the full answer →This is a serious problem to uncover before, rather than during, a sale, because an existing default can undermine the whole transaction regardless of…
Read the full answer →A disputed rent arrears claim can become a real obstacle to closing, since most landlords are reluctant to consent to an assignment while they believe…
Read the full answer →A landlord generally keeps its ordinary rights under the lease and general landlord-tenant law, and those rights aren't automatically frozen just…
Read the full answer →A landlord generally cannot unilaterally rewrite your lease's permitted-use clause — changing what the tenant is allowed to do in the space is an…
Read the full answer →Often yes, if your lease says so. Many commercial leases entitle the landlord to recover its reasonable legal and administrative costs of reviewing and…
Read the full answer →You can ask, and most buyers will want exactly this before closing — it's commonly done through what's called an estoppel certificate (or sometimes a…
Read the full answer →Yes, and this is one of the most common practical risks in a business purchase and sale involving leased premises — landlord consent is frequently the…
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