Assumed vs. Excluded Assets in an Ontario Asset Purchase Agreement

Buyers often describe an asset purchase in broad terms — "I'm buying the business." Legally, that's not quite what happens. What a buyer actually acquires is whatever is specifically listed, described, or scheduled in the asset purchase agreement (APA) as an included asset — nothing more, no matter how obviously something seems to belong to the business being sold.

That distinction matters more than it sounds like it should. This article walks through what typically counts as an included asset, what's typically carved out as excluded, and where the gaps between the two tend to cause real disputes.

Why the Asset List Is the Real Deal, Not the Recitals

Purchase agreements often open with general, narrative language describing the business being sold. That language sets context — it isn't the operative part of the contract. The actual transfer happens through specific schedules that list, describe, or categorize exactly which assets are changing hands. If an asset isn't captured there, it generally isn't part of the deal, regardless of how the business is described elsewhere in the agreement.

Assets Commonly Included

• [ ] Equipment, machinery, fixtures, and furniture used in the business
• [ ] Inventory on hand as of closing
• [ ] Contracts and leases specifically identified for assignment, subject to any required third-party consent
• [ ] Intellectual property used in the business — trademarks, trade names, domain names, proprietary processes and know-how
• [ ] Goodwill and customer or client lists
• [ ] Licences and permits, to the extent they're transferable
• [ ] Books and records relating specifically to the purchased assets

Assets Commonly Excluded

• [ ] Cash on hand and bank accounts
• [ ] Accounts receivable existing at closing, unless the parties specifically agree the buyer is purchasing them
• [ ] The seller's corporate minute book and historical tax records (often retained by the seller, sometimes with buyer access rights)
• [ ] Personal assets of the owner that aren't actually used in the business
• [ ] Specific contracts or leases the buyer doesn't want assigned
• [ ] Insurance policies — the buyer typically arranges its own coverage rather than inheriting the seller's

Where the Gaps Show Up

The asset list looks simple on paper. In practice, three areas cause most of the trouble.

Leases. Assigning a commercial lease generally requires landlord consent. Under Ontario's Commercial Tenancies Act, where a lease restricts assignment without consent, that consent is deemed not to be unreasonably withheld unless the lease itself says otherwise — but the lease's own wording still controls first. A lease listed as an included asset is only as good as the assignment actually being completed; simply naming it in the schedule doesn't transfer occupancy rights on its own.

Intellectual property. Listing "intellectual property" as an included asset is not the same as the buyer actually holding clean title to it. Trademark and other registrations need to be properly transferred and, where applicable, recorded — an incomplete transfer can leave a buyer with rights that are weaker than the schedule implies.

Trade names. If the buyer intends to keep operating under the seller's existing business name, that name is itself an asset worth listing specifically — and continuing to trade under a name other than the buyer's own legal or corporate name generally triggers a registration obligation under Ontario's Business Names Act.

GST/HST and the Asset List

GST/HST generally applies to the sale of most business assets. On a qualifying asset sale, the buyer and seller can jointly elect under the federal Excise Tax Act to have no GST/HST apply, where the buyer is acquiring ownership, possession, or use of all or substantially all of the property necessary to carry on the business (or a part of it) as a business. There's no single fixed percentage that defines "all or substantially all" — it's assessed on the facts of the transaction — which is one more reason the completeness of the asset schedule itself can affect whether this election is even available. Confirm eligibility with your accountant before assuming the election applies.

A Short Checklist Before You Sign

• [ ] Does the schedule list every asset you expect to receive (or transfer), by name or clear description?
• [ ] Are the contracts and leases you're counting on actually assignable, with consent addressed?
• [ ] Have IP registrations been confirmed as transferable, and is the transfer process built into the closing steps?
• [ ] If you plan to keep the seller's trade name, has Business Names Act registration been addressed?
• [ ] Has your accountant reviewed whether the deal may qualify for the GST/HST no-tax election?

Frequently asked questions