- A purchase agreement's representations aren't symmetrical, and there's a straightforward reason why: the seller holds almost all of the pre-closing information about the business.
- When the seller is a corporation and the deal is structured as a sale of substantially all of its assets, corporate law adds a layer on top of the ordinary "we have the authority to sign…
If you're selling a business in Ontario, the representations section of your purchase agreement is where you'll spend the most negotiating time — and where careful drafting matters most. It's the section that turns "trust me, the business is in good shape" into a specific, enforceable set of statements the buyer can hold you to.
Seller representations exist in recurring categories across almost every Ontario business purchase agreement, whether it's structured as a share sale or an asset sale. Knowing what's coming lets you prepare your disclosure schedule properly, instead of scrambling once your lawyer sends over a draft covered in defined terms.
Why the Seller's List Is So Much Longer Than the Buyer's
A purchase agreement's representations aren't symmetrical, and there's a straightforward reason why: the seller holds almost all of the pre-closing information about the business. The buyer wasn't there for the last several years of operations, contracts, and employee decisions — so the agreement puts the burden on the seller to make specific, detailed statements about what's actually true, rather than leaving the buyer to guess.
The Recurring Categories
| Category | What It Typically Covers |
|---|---|
| Organization and authority | The seller (and, in a share sale, the corporation itself) validly exists, is properly organized, and has the power and internal approvals needed to complete the sale |
| Title | The seller owns the shares or assets being sold, free of undisclosed liens or competing claims |
| Financial statements | The financial statements fairly present the business's financial position, prepared on a consistent basis |
| Taxes | Required tax returns have been filed and taxes paid, subject to any specific exceptions disclosed |
| Contracts | Material contracts are listed, in good standing, and not in default |
| Employees | Employee information, compensation, and any outstanding employment-related claims are accurately disclosed |
| Litigation | Existing or threatened legal proceedings involving the business are disclosed |
| Compliance and permits | The business holds the licences and permits it needs and operates in compliance with applicable law |
| Intellectual property | The seller owns, or has proper rights to use, the intellectual property the business relies on |
| Environmental | No undisclosed environmental liabilities affect the business or its property |
| No undisclosed liabilities | Beyond what's scheduled or reflected in the financial statements, there are no other material liabilities |
Authority Gets Extra Attention From a Corporate Seller
When the seller is a corporation and the deal is structured as a sale of substantially all of its assets, corporate law adds a layer on top of the ordinary "we have the authority to sign this" representation. Under both the Business Corporations Act (Ontario) and the Canada Business Corporations Act, a sale, lease, or exchange of all or substantially all of a corporation's property outside the ordinary course of business generally requires shareholder approval by special resolution. A corporate seller typically represents that this approval has been obtained where the transaction requires it, and that entering into and completing the agreement doesn't conflict with its own constating documents or other binding obligations. A straightforward share sale, by contrast, is a transaction of the shareholders' own shares and doesn't itself require this corporate-level approval step.
Each Representation Is Only as Good as the Disclosure Behind It
None of these categories are meant to be read in isolation. Every broad representation in the list above is typically qualified by a disclosure schedule — a separate document where the seller lists the specific, real-world exceptions to each statement. A representation that "there is no material litigation" only means something once it's read alongside whatever litigation the seller has actually disclosed against it. Sellers who treat the schedule as an afterthought are the ones most likely to face a claim later over something that, honestly, they simply forgot to write down.
Frequently asked questions
Does a seller have to disclose things a buyer never specifically asked about?
Generally, yes, if the fact falls within the scope of a representation the seller is making. Representations are broad by design precisely so sellers can't rely on the buyer failing to ask the right question — silence isn't the same as disclosure.
What happens if a representation was true when signed but false by closing?
This is exactly why many agreements require representations to be "brought down" — repeated and confirmed true as of the closing date, not just the signing date. If something changes in between, the seller typically needs to update the disclosure schedule, and depending on how serious the change is, it can affect whether the buyer is obligated to close at all.
Can a seller qualify a representation with "to the seller's knowledge"?
Yes, and this is a heavily negotiated point. A knowledge qualifier limits the seller's exposure to what they actually knew (or reasonably should have known), rather than making them an absolute guarantor of every fact about the business. Buyers often push to define exactly whose knowledge counts and what due inquiry that person is expected to have made.
Are personal guarantees from the seller's owner ever layered on top of these representations?
Sometimes, particularly in smaller deals where the buyer wants extra assurance behind the corporate seller's promises. Whether that's appropriate — and how it should be structured — depends heavily on the specific transaction and should be discussed with your lawyer.
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