What should I investigate when buying an Ontario business?

Due diligence is the investigation a buyer conducts to verify what they are actually purchasing. In Ontario business acquisitions, due diligence typically covers several key areas.

Legally, you want to review the corporate records (minute books, share structure, director resolutions), all material contracts and whether they contain change-of-control clauses that could allow termination on a sale, any pending or threatened litigation, intellectual property ownership, and regulatory licences or permits required to operate.

Financially, you review audited or reviewed financial statements, tax returns and any outstanding tax assessments, accounts receivable and payable, and any undisclosed liabilities. Employment matters — existing contracts, benefit plans, and whether employees carry over — need separate attention.

In an asset deal you should also verify that the seller actually owns what they are selling, that there are no security interests registered against the assets under the Personal Property Security Act, and that environmental obligations do not attach to the property or equipment.

Due diligence findings shape your purchase price, representations and warranties, and indemnification provisions. Skipping it — or rushing it — is one of the most common and expensive mistakes buyers make.