What Due Diligence Involves When Buying a Business in Manitoba

Due diligence is the checking you do before you commit to buy a business. You test what the seller has told you against documents and public records, so that price and risk match reality.

There is no single required list. The order below is a practical one, working from the basics to the details. Each business is different, so use it as a starting point and adapt it with your lawyer and accountant.

This article covers the law of Manitoba.

Step 1: Confirm who the seller is

Begin with the legal identity of the business. Is it a corporation, a partnership or a sole proprietor? Who are the directors and owners? The Manitoba Companies Office publishes online instructions for corporate and registry searches and file summaries, which you can use to confirm a corporation's existence, directors and filings.

If the seller is a corporation, ask for the minute book, share records and any shareholder agreement. A unanimous shareholder agreement can affect shareholders' rights. Also confirm who has authority to sell.

Step 2: Search for debts and claims against the assets

Under The Personal Property Security Act (Manitoba), any person may request a Personal Property Registry search by the name of a debtor. Run it against the seller's exact legal name, because an error in a debtor's name can invalidate a registration only if a search under the correct name would not reveal it. Searches under variations of the name are a sensible extra step.

Manitoba Regulation 88/2026 amended the Personal Property Registry Regulation, including a debtor birth-date field and the withholding of certain debtor address information from search results. Searches may therefore look different from older ones, so ask your lawyer to run and read them.

If a search shows a lender's claim over equipment or inventory, plan how it will be paid out or released at closing.

Step 3: Financial and tax review

Ask for several years of financial statements, tax returns, sales records and a list of what the seller owes. Have your accountant compare them against bank records and look for anything unusual.

Tax history matters most in an asset deal. A buyer who does not obtain the duplicate bulk sale certificate is liable for the seller's tax debt as at the date of sale, including amounts assessed later for earlier transactions. The seller must apply to the director (Taxation Division) before disposing of the property, and the application must include the sale agreement with a breakdown of the price by asset class. If you obtain the duplicate, a debt that existed when it was issued may be enforced against the seller but not against you.

In a share purchase, bulk sale rules do not apply. You take over the corporation's history, so review its tax filings even more closely.

Also ask how GST/HST will be handled. Buyer and seller can jointly elect on Form GST44 to pay none if the buyer acquires all or substantially all (at least 90%) of the property needed to carry on the business. The price allocation among assets affects your capital cost allowance and goodwill treatment.

Step 4: Employees, contracts and property

When a business is sold so that control passes to another person, employment is deemed continuous for the minimum standards in Divisions 2 to 5, 9 and 10 of Part 2 of The Employment Standards Code. That is not a rule for every entitlement. Ask for a list of employees with start dates, pay, vacation owing and any written agreements.

• Leases: check the term, renewal rights and whether the landlord must consent to a transfer.
• Customer and supplier contracts: look for consent or change-of-control clauses.
• Licences and permits: ask which regulator issues each one and how long a transfer takes. This varies, so confirm with the regulator.
• Equipment and inventory: inspect it and match it against the list in the agreement.
• Insurance, pending claims and disputes: ask for the history and any open matters.

Step 5: Approvals and what to do next

Check whether any outside approval is needed. If the seller is a corporation selling all or substantially all its property outside the ordinary course of business, shareholders must approve by special resolution. Most small purchases fall well below the Competition Act's $93 million transaction-size threshold. A non-Canadian buyer must still file an Investment Canada Act notification within 30 days after implementation, even below review thresholds.

• Request corporate records and confirm directors and filings.
• Run Personal Property Registry searches under the seller's exact legal name.
• Have an accountant review financial statements and tax filings.
• Build the bulk sale certificate and any GST44 election into the agreement's conditions.
• Review leases, contracts, licences and employee records.
• Write down any problems you find and talk with a lawyer about price, fixes or walking away.

Frequently asked questions