The Contract Clause That Almost Broke a Kitchener Care Company Sale

The situation

Taras had spent eight years teaching elementary school before he and Hodan, a registered nurse, decided to build something of their own. They started a home care staffing company in Kitchener that placed personal support workers and nurses with families needing care at home. Over twelve years it grew from a handful of clients to several hundred, with a payroll of caregivers who mostly stayed for years at a time. The business had never taken on outside investors; every dollar of growth had come from reinvested earnings and long hours, first at their kitchen table and eventually from a small office they leased once the staffing rosters outgrew a spare bedroom.

By last year, a larger multi-city home care operator had made an offer to buy the business outright: a share purchase in the neighbourhood of $24 million. For Taras and Hodan, in their fifties and looking at a slower pace after more than a decade of round-the-clock scheduling calls, the offer represented both an exit and a chance to see the company continue under an owner with more resources to grow it further.

Taras and Hodan came to Treadstone Law once the letter of intent was signed, wanting a sale-side team to take them through due diligence, the purchase agreement, and closing. Neither of them had sold a business before, and both assumed the hard part was negotiating the price. The price, as it turned out, was the easy part.

What due diligence found

Due diligence is the process where the buyer, and often the seller's own lawyers, comb through a company's contracts, finances and corporate records before a sale closes, looking for anything that could reduce the business's value or create liability. For a services business like this one, the client contracts were the real asset being sold — more than the office lease or the equipment, they represented the recurring revenue the buyer was paying for.

Reviewing those contracts turned up a clause repeated across roughly two-thirds of the company's client agreements: a requirement that the client consent before the agreement could be assigned to a new owner, triggered whenever there was a change of control of the company providing the service. In a share sale — where the buyer purchases the shares of the company rather than its individual assets — the company itself does not legally change hands in the way people assume. But many of these contracts had been drafted broadly enough that a change in who ultimately owned the company still counted as a trigger requiring consent.

Left unaddressed, that meant a real possibility that a meaningful share of the client base could treat the sale as grounds to cancel their service agreement in the weeks after closing, whether out of genuine concern about a new operator or simple inertia in never getting asked. The buyer's team had flagged the same clause and made it clear the deal's value assumed those relationships stayed intact. There was a second risk sitting alongside it: Abdi, the company's long-time operations manager, was the person most family clients and caregivers actually dealt with day to day. If Abdi left in the transition — as key employees sometimes do once a founder-owner cashes out — service quality and client retention could slip in exactly the window the buyer would be watching most closely.

Neither risk showed up as a single dramatic event. Both were the kind of thing that quietly erodes a business's value over its first ninety days under new ownership, long after the closing dinner is over.

What we did

1. Catalogued every contract with a consent clause. We worked through the client agreement templates and their variations to identify which ones actually required consent on a change of control, separating those from contracts that used looser language not triggered by a share sale. This turned a vague worry into a defined list the parties could act on.
2. Sought consents on a rolling basis before closing. Rather than waiting for the sale to close and hoping clients stayed put, we worked with Taras and Hodan to reach out to clients under the flagged contracts ahead of time, framing the outreach around continuity of care rather than a change of ownership. Most consents came back within a few weeks once families understood their caregiver and service plan were not changing.
3. Built an escrow mechanism for what remained unconsented. An escrow is money held back at closing, released later once specific conditions are met. For contracts where consent had not yet come through by the closing date, the purchase agreement held back a portion of the price — roughly $1.5 million — to be released once those consents were obtained or those specific accounts were confirmed retained, giving the buyer protection without holding up the whole transaction.
4. Negotiated a retention arrangement for the key employee. We helped structure a short-term retention agreement for Abdi, giving both certainty of continued employment on defined terms and a financial incentive tied to staying through the transition period, addressing the buyer's concern directly rather than leaving it to chance.
5. Drafted the day-one communication plan. Working alongside the buyer's team, we prepared the sequence of what staff and clients would be told, and when — starting with a staff meeting the morning of closing, followed by direct outreach to clients within the same week, so that no one heard about the sale secondhand or through a rumour before hearing it from the company itself.
6. Coordinated the closing sequence with the buyer's counsel. The consent tracking, the escrow terms and the communication plan all had to line up with the actual closing date, so we kept a shared checklist with the buyer's lawyers in the final weeks to make sure nothing about the transition caught either side off guard.

The outcome

The sale closed roughly on schedule. By closing day, consent had been obtained for the great majority of the flagged contracts, and the escrow held back only a modest portion tied to the small number still outstanding — released in full within about two months once those were resolved. No client cancelled service in the weeks after closing citing the change in ownership. Abdi stayed on under the new operator through the retention period and beyond.

What made this a prevention story rather than a recovery story is that none of it required damage control. The consent clauses were identified during due diligence, before closing, while there was still time to reach out to clients calmly and on the company's own timeline. Had the same gap surfaced after closing — with the buyer discovering a wave of client cancellations or Abdi handing in notice — the conversation would have shifted from planning to dispute, likely drawing on the escrow or indemnity provisions of the purchase agreement to compensate the buyer for a business that had turned out to be worth less than what was paid for it. Taras and Hodan avoided that entirely, and closed the sale of the company they had built without a single client relationship lost in the handover.

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