How are contracts and permits handled in an asset sale versus a share sale in BC?
This answer covers the law of British Columbia.
In a share sale, you buy the company itself and take it over with its history and liabilities, and a change in share ownership does not change the tax values of its assets. In an asset sale, you buy selected assets, so each lease, supplier contract, licence and permit has to be checked to see whether it can be moved to you.
Which ones need the other party's consent, or a new licence issued in your name, depends on the wording of each contract and on the office that issued each permit. Read every lease and agreement for clauses about assignment or a change of control, and ask each issuing office what it requires.
Other obligations follow the business in an asset sale too. If all or part of a business is disposed of, employment is deemed continuous, so the buyer takes on the seller's obligations to employees who stay, with exceptions: if the seller terminates employees before the sale, the seller owes their wages and compensation, and a trustee in bankruptcy's going-concern sale does not make the buyer liable for earlier wages. A buyer of substantially all of a seller's inventory or business assets in B.C. should also obtain a PST clearance certificate.
Key takeaways
- In a share sale the company does not change, and the buyer takes it with its history and liabilities.
- In an asset sale, each lease, supplier contract, licence and permit has to be checked individually to see whether consent or reissue is needed.
- In an asset sale, employees who stay have continuous employment, so the buyer takes on the seller's obligations to them, but not if the seller terminated them before the sale, if they refuse to work for the buyer without substantial changes to their conditions, or if a trustee in bankruptcy sold the business as a going concern.
- A buyer of substantially all of a seller's inventory or business assets should consider a PST clearance certificate before closing.