Third-Party Consents and Closing Conditions in an Ontario Business Sale

When you sign a purchase agreement for a business, it can feel like the deal is done. In reality, a signed agreement is often just the starting gun for a closing process that depends on people who never sat at the table — landlords, lenders, franchisors, and key suppliers whose agreements were made with the seller, not with you.

Whether third-party consent becomes a real issue depends heavily on how the deal is structured. In an asset purchase, the buyer steps into specific contracts one at a time, so getting the right people to agree is often central to closing. In a share purchase, the corporation itself changes hands and most contracts simply stay where they are, unless one has its own change-of-control trigger.

This article looks at which contracts commonly need sign-off before an Ontario business sale can close, how that requirement gets built into the purchase agreement, and what happens if a consent doesn't arrive in time.

Why Consent Becomes a Closing Condition

A contract generally cannot be handed to someone new without the other party's agreement, particularly where it expressly restricts assignment. In an asset sale, the buyer is not acquiring the seller's corporation — it is acquiring specific assets and, where agreed, specific contracts. That means each restricted contract the buyer wants to keep operating under needs to be assigned, and assignment usually needs consent.

Purchase agreements typically handle this by making receipt of the important consents a condition precedent to closing. If enough material consents aren't obtained by the closing date, either party may have grounds to delay closing, adjust the deal, or walk away, depending on what the agreement says.

A share sale generally avoids this problem, since the corporation stays the same contracting party and ownership simply changes above it. The exception is a contract that specifically defines a change in share ownership as an assignment or default — common enough in leases and financing agreements that it needs to be checked, not assumed.

Contracts That Commonly Need Consent to Assign

Commercial Leases Get Extra Statutory Protection

Ontario's Commercial Tenancies Act addresses this directly for leases. Where a lease restricts assignment or subletting without the landlord's consent, the Act deems that consent is not to be unreasonably withheld — unless the lease expressly says otherwise. That does not mean a landlord must simply agree; it means an unreasonable refusal is not enforceable on its own terms. The lease's own wording still comes first, and many leases add their own conditions — financial disclosure from the buyer, a personal guarantee, or an administrative fee — that a landlord can still insist on before signing off.

Franchise Transfers Need Their Own Review

A franchise resale can also raise separate questions under the Arthur Wishart Act, on top of the franchisor's own consent requirements. Whether a resale triggers a fresh disclosure obligation to the buyer is fact-specific and should never be assumed either way — flag it early rather than the week before closing.

Building Consent Requirements Into the Purchase Agreement

A well-drafted purchase agreement usually handles third-party consents in a few connected ways:

1. A schedule of material contracts listing which agreements need consent to assign, and to whom.
2. A covenant on the seller to use commercially reasonable efforts to obtain the listed consents before closing.
3. A closing condition tied to receipt of some or all of those consents.
4. An allocation of risk if a consent is refused or delayed — a price adjustment, an interim arrangement, or a right to walk away.

What Happens If a Consent Doesn't Come Through

Even with everyone acting in good faith, a landlord or lender can simply be slow, or can refuse outright. Purchase agreements generally give the parties a few practical paths forward: extending the closing date to allow more time; waiving the condition, usually the buyer's call since the buyer bears the risk; carving out the affected contract and arranging a temporary fix while consent is pursued after closing; or adjusting the purchase price to reflect a contract that won't transfer.

None of this is automatic — what happens depends entirely on how the agreement was drafted, which is why the consent process deserves attention well before the closing date arrives.

Getting Ahead of Consent Issues

• [ ] Identify every contract that restricts assignment or contains a change-of-control clause, early in due diligence.
• [ ] Confirm whether the deal is an asset sale or share sale, since that changes which consents actually matter.
• [ ] Approach landlords, lenders, and key counterparties as soon as the deal terms are firm enough to share.
• [ ] Build realistic time into the closing timeline for slow-moving third parties.
• [ ] Decide in advance what happens if a specific consent is refused or delayed.

Frequently asked questions