- A judgment is a court's formal decision that one party owes another party money (or must do something).
- If a seller has an outstanding judgment against them and structures a sale in a way that looks designed to move value out of reach of that creditor, a buyer can end up drawn into a…
- A thorough due diligence file typically includes more than one of these.
Not every debt a seller owes shows up on a balance sheet. If a creditor has already sued a seller and won, that judgment can be filed for enforcement against the seller's property — and an execution search is how a buyer finds out whether that's happened before money and assets change hands.
This is a narrower, more targeted search than a general litigation check: it's specifically about debts a court has already confirmed are owed, and enforcement steps already taken to collect them.
What Counts as an "Execution" or "Judgment"
A judgment is a court's formal decision that one party owes another party money (or must do something). Once a creditor has a judgment, it can take further steps to enforce it — commonly by filing the judgment for execution against the debtor's property through the local enforcement office. That filed judgment is sometimes described as a "writ" of enforcement, and it can affect property the debtor owns in that area.
An execution or judgment search checks whether any such enforcement filings exist against the seller — or against the target corporation itself — in the relevant jurisdiction.
Why This Matters in a Business Purchase
The concern isn't abstract. If a seller has an outstanding judgment against them and structures a sale in a way that looks designed to move value out of reach of that creditor, a buyer can end up drawn into a dispute they had nothing to do with. Even short of that, an outstanding judgment against the seller corporation is a signal worth investigating — it tells you a creditor pursued a claim to completion and the debt was never resolved.
How much this matters to your deal depends heavily on structure:
- Share purchase: any judgment against the corporation is a debt of the entity you're acquiring.
- Asset purchase: a judgment against the seller personally, or against the seller corporation generally, does not automatically transfer to specific assets you're buying — but it's still worth knowing about, especially if it could motivate a distressed or rushed sale.
How an Execution Search Fits Alongside Other Searches
| Search Type | What It Looks For |
|---|---|
| Litigation search | Active or recent lawsuits, whether or not they've resulted in a judgment yet |
| Execution / judgment search | Judgments already obtained and filed for enforcement |
| PPSA search | Registered, consensual security interests (loans, equipment financing) |
They overlap in purpose — protecting a buyer from the seller's financial history — but they look at different records and different stages of a creditor's process. A thorough due diligence file typically includes more than one of these.
What to Do If a Search Turns Something Up
- Identify the creditor and the amount of the judgment.
- Ask the seller directly for an explanation and documentation of the underlying dispute.
- Determine whether the judgment relates to the business at all, or to an unrelated personal matter.
- Where the judgment is against the corporation you're buying shares of, treat it as a liability to be resolved, adjusted for, or specifically indemnified before closing.
- Where timing looks unusual — a sale moving quickly after a judgment is entered — flag it for your lawyer to review the transaction for creditor-protection issues.
Building the Search Into Your Purchase Agreement
A clean execution search at one point in time isn't the end of the story — a new judgment can be entered against the seller between the day you search and the day you close. A few contract terms help close that gap:
- A representation and warranty from the seller confirming there are no outstanding, unsatisfied judgments against them or the corporation, current as of closing
- A bring-down search ordered shortly before closing, rather than relying solely on an early due diligence result
- An indemnity covering any judgment that existed but wasn't disclosed, discovered after closing
- A closing condition requiring any disclosed judgment to be satisfied, or specifically addressed through a holdback, before the deal completes
These are the same categories of protection used across most due diligence findings — the details just get tailored to what an execution search is actually capable of showing.
Frequently asked questions
How much does an execution or judgment search cost?
There is generally a modest fee to run one, and it can vary by search method and jurisdiction. Confirm current pricing with your lawyer or search provider rather than assuming a set amount.
Does an execution search cover debts owed to the CRA?
Not typically in the same way — tax debts and their enforcement mechanisms are handled separately from ordinary civil judgments. If CRA debt is a concern, that calls for its own line of due diligence.
If the seller has an old judgment against them, does that automatically kill the deal?
No. Many judgments are resolved, satisfied, or simply irrelevant to the assets or shares you're buying. The point of the search is to know it exists so you and your lawyer can assess whether it matters here.
Should I search against the corporation, the individual owner, or both?
Generally both, where practical — a corporation's judgments and an individual owner's judgments are tracked separately, and either one can be relevant depending on how the deal and the business are structured.
This is a business purchase or sale question
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