What Does 'Subject to Due Diligence' Mean in a Business Offer in BC?

This answer covers the law of British Columbia.

A 'subject to due diligence' condition means your offer depends on you being satisfied with what you find when you investigate the business. How long it lasts, what you can check, and how you remove it or walk away all depend on the wording of your offer, so have a lawyer review that wording before you sign.

What you can check is wide. A Personal Property Registry search shows security agreements and commercial liens, but builders' liens and some other liens are filed elsewhere, so it does not reveal every lien. A title search covers land if the business owns property, and a bankruptcy and insolvency records search covers bankruptcies registered since 1978. You should also get a PST clearance certificate before buying a business, and a corporate search shows a company's current directors.

If you buy a business, employees who stay keep their past service, so you take on the seller's obligations to them. Exceptions apply if the seller ends their employment before the sale, or a trustee in bankruptcy sells the business as a going concern. In a share purchase, you take the company with its history and liabilities. If a deal falls apart over a deposit, a BC court can relieve against penalties and forfeitures on terms.