Can One Lawyer Act for Both Buyer and Seller in New Brunswick?

When a buyer and seller already know and trust each other, sharing one lawyer can look like a sensible way to save time and cost. It can feel awkward to hire separate advisers against someone you get along with.

This article explains, in general terms, why a conflict of interest arises in a business sale, what to ask before agreeing to joint representation, and what the alternatives are. Whether a particular arrangement is permitted depends on the rules that govern lawyers and on your facts, so it should be confirmed with a lawyer.

This article covers the law of New Brunswick.

Why the question is harder than it looks

A lawyer's job is to protect the interests of the client. In a business sale, the buyer and seller are on opposite sides of the table. Even when they are friendly, their interests are not the same, and a single lawyer cannot push for both at once.

Lawyers are governed by professional rules about conflicts of interest. This article does not set out those rules in detail. A lawyer you approach will be able to tell you whether the rules allow the lawyer to act in your matter and what you would need to agree to.

Where buyer and seller interests pull apart

The deal structure alone shows how interests differ. Here are some common examples.

• Share sale or asset sale. In a share purchase the company stays the same legal entity, so the buyer takes it with its past liabilities inside it. A buyer may prefer an asset sale for that reason.
• Tax. The lifetime capital gains exemption can apply to a gain on qualified small business corporation shares owned by an individual, but it does not apply to an asset sale by the corporation. This is a main reason sellers prefer a share sale.
• Transfer costs. If land or buildings are transferred in an asset sale, real property transfer tax of 1% of the greater of the consideration or the assessed value is charged when the deed is registered. A share sale does not register a deed. Who bears that cost is a point for negotiation.
• Employees. In an asset sale the buyer inherits employees' service for notice and similar entitlements.
• Lender claims. A lender's registered claim over equipment, inventory or receivables can stay attached to assets a buyer acquires. How the seller deals with that before closing is a negotiating point.

On each of these, a lawyer acting for the buyer would advise one thing and a lawyer acting for the seller another. A lawyer acting for both cannot freely advise either side to push harder.

When joint representation may be possible, and when it is unwise

Whether joint representation is allowed at all depends on the professional rules and the circumstances, so it is worth asking the lawyer directly. Even if it is allowed, it is usually only worth considering where the deal is simple, the terms are already agreed and both sides understand the lawyer cannot take sides.

It is generally unwise where any of the following apply.

• The price, structure or payment terms are still being negotiated.
• The seller will be paid over time, or stays involved after closing.
• There are doubts about liabilities, lender claims, employees or taxes.
• One side is less experienced or has less information than the other.
• Either side could end up in a dispute after closing.

If a dispute arises later, a lawyer who acted for both may not be able to help either of you. That can leave both sides paying for new advice at the worst time.

Alternatives to sharing one lawyer

Separate lawyers do not have to mean a hostile deal. Many buyers and sellers who get along still find that clear, independent advice on each side makes closing smoother.

What to do next

• Decide what is already agreed and what is still open.
• Ask any lawyer you approach whether they can act for both of you, and what they would need from each of you.
• Confirm the lawyer is a practising member of the Law Society of New Brunswick, since non-practising, retired, suspended, disbarred and resigned members cannot practise law or handle trust funds.
• If land or buildings are part of the sale, remember that a lawyer is needed to register the transfer.
• Consider at least independent advice on the agreement if you choose to share a lawyer.

Do not assume a person who calls themselves a notary can do everything a lawyer can. Every member of the Law Society is a notary public, but a member who is not a practising member may not use any notarial power that involves practising law.

Frequently asked questions