- A closing involves a core set of documents, and which ones you need depends on whether the deal is an asset sale or a share sale.
- In British Columbia, several side steps connect to closing, including a PST clearance certificate, a possible GST election and liquor licence timing.
- Employment generally continues when a business is disposed of, so the buyer takes on service history with the seller.
Closing day is when a business sale becomes real. Money moves, ownership changes, and a stack of documents is signed. If you are buying or selling, it helps to know what each paper does so nothing is signed blindly.
The exact list depends on whether you are buying assets or shares, and on the business. This article describes the usual documents in plain terms and then flags British Columbia items that often need to be sorted out around the same date.
This article covers the law of British Columbia.
Asset sale or share sale: why it changes the list
In an asset sale, the buyer picks up specific things, such as equipment, inventory, contracts and goodwill. Each category needs its own transfer paper. In a share sale, the buyer takes the shares of the company, and the company keeps its contracts, licences and obligations.
The tax treatment also differs. PST applies to taxable assets such as affixed machinery, equipment, computer hardware and supplies, but not to goodwill, inventory, accounts receivable or real property, and PST does not apply to the sale of shares of a business.
The core closing documents
- Purchase agreement: the main contract setting the price, what is included, promises and conditions. It is usually signed before closing.
- Bill of sale (asset sale): confirms the seller transfers the physical assets to the buyer.
- Assignment agreements: transfer contracts, leases and intellectual property, often needing the other party's consent.
- Share transfer and share certificates (share sale): move ownership of the shares to the buyer.
- Directions to pay or funds direction: tells the lawyer who receives what money.
- Releases: the seller or others give up claims against the buyer or the company.
- Director and officer resignations and consents (share sale): remove outgoing directors and officers and appoint new ones.
- Officer's certificates or statutory declarations: confirm that promises in the agreement remain true on closing.
- Non-competition or transition agreements: if agreed, set what the seller will and will not do after closing.
Your lawyer will tailor this list. Some deals add a promissory note, a security agreement or a holdback arrangement if part of the price is paid later.
British Columbia items that tie into closing
| Item | What to know |
|---|---|
| PST clearance certificate | A purchaser buying a business or an interest in one in a bulk transaction should obtain one, or the purchaser is liable for any outstanding amount owed by the collector. It confirms PST, penalties and interest are paid up to the issue date. |
| GST election | Where the buyer acquires all or substantially all the property needed to carry on the business, the supplier and a registrant recipient may jointly file an election so no GST is payable. It is not available where the supplier is a registrant and the recipient is not. |
| Liquor licence | The seller starts the transfer in the portal and the buyer applies with the $330 fee. The business can stay open, and the buyer becomes the deemed licensee once the LCRB says the application is administratively complete. |
| Lease | Whether a landlord may refuse consent to an assignment depends mainly on the lease terms and case law, because the Commercial Tenancy Act does not set a general rule. |
| Land | If land is bought with the business, property transfer tax is 1% on the first $200,000 of fair market value, 2% from over $200,000 to $2,000,000, and 3% above $2,000,000. |
Employees, related parties and franchises
If all or part of a business is disposed of, an employee's employment is deemed continuous and uninterrupted. The purchaser takes on the employer role and must honour the employee's length of service with the seller. The purchaser pays outstanding wages and assumes accrued vacation pay. In a share sale the employer corporation does not change, so employment continues with the same employer.
If the buyer is a spouse, common-law partner, a person under 18 or a person not dealing at arm's length with the seller, the transferee and transferor can be jointly and severally liable for the transferor's tax, up to the excess of the property's fair market value over what was paid. Special rules apply to transfers after a relationship breakdown under a court order or written separation agreement.
If the business is a franchise, the disposition of the franchise, including shares in the owning corporation, is a grant under the Franchises Act. Check the franchisor's approval and disclosure requirements before closing.
What to do next
- Ask your lawyer for a closing checklist as early as possible.
- Confirm whether the deal is an asset sale or a share sale.
- Apply for a PST clearance certificate before closing, with the collector's consent.
- Ask your accountant whether a GST election applies.
- Keep any liquor licence renewal current, because an expired licence cannot be transferred.
- Review every document before closing day, not at the signing table.
Frequently asked questions
Who prepares the closing documents?
Usually the lawyers for the parties prepare and exchange them, often with one side drafting the main set. You should still read each one and ask what it does before closing day.
Do I need a PST clearance certificate when buying a business?
A purchaser buying a business, or an interest in one in a bulk transaction, should obtain one. Without it, the purchaser is liable for any outstanding amount owed by the collector. The purchaser applies online or with form FIN 447, with the collector's consent.
What happens to the employees when the business is sold?
Where all or part of a business is disposed of, employment is deemed continuous and uninterrupted. The purchaser must honour the employee's length of service with the seller. Exceptions exist, such as a trustee's sale in bankruptcy.
Can the business keep operating while a liquor licence transfer is processed?
Yes, the establishment can stay open during the application. The seller remains responsible for the licence until the LCRB tells both parties the application is administratively complete, and then the buyer becomes the deemed licensee.
Sources
- Province of British Columbia – Transfer a liquor licence — www2.gov.bc.ca
- Employment Standards Act, RSBC 1996, c. 113 — bclaws.gov.bc.ca
- BC Employment Standards Branch – Interpretation Guidelines, s. 97 — www2.gov.bc.ca
- Province of British Columbia – Buying and selling a business (PST) — www2.gov.bc.ca
- Excise Tax Act s. 167 — Justice Laws (federal)
- Income Tax Act s. 160 — Justice Laws (federal)
- Province of British Columbia – Property transfer tax — www2.gov.bc.ca
- Commercial Tenancy Act, RSBC 1996, c. 57 — bclaws.gov.bc.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a buying & selling a business question
Buying or selling a business with us is from $3,358.88, tax included. Third-party fees are extra.