Building a Governance Structure the Target Never Had

The situation

Twenty-two million dollars, give or take some post-closing adjustments, was the number on the term sheet when Mykola first called our office, representing a private equity-backed buyer looking to acquire a North Bay industrial services company as the platform for a broader roll-up strategy across the region. The buyer's fund had done platform deals elsewhere in the country before, in other industries and other cities. This was its first in North Bay, and the plan was straightforward on paper: acquire the company, strengthen its management bench with experienced operators, and use it as the base for several further add-on acquisitions over the following few years as the fund built out the region.

The target had been built over two decades by its founders, Anusha and Senthil, from a small maintenance operation into a company generating solid recurring revenue with a loyal customer base spread across the region. Neither had retained a lawyer for the sale. Anusha had handled most of the company's own legal filings herself over the years, doing the annual returns and basic paperwork in the evenings around her day job as a court clerk, while Senthil kept working shifts as a firefighter until only a few years ago, when the company finally grew large enough to support both of them without outside income. Both she and Senthil approached the negotiation directly, without counsel on their side of the table, which was unusual for a deal of this size and shaped nearly every stage of what followed from that point on.

Early conversations were cordial and moved faster than a typical mid-market deal, in part because there was no second set of lawyers slowing down document turnaround with competing drafts and redlines. Mykola's fund had already lined up debt financing conditional on a clean closing within a defined window, and the plan was to move through diligence quickly and get to signing within a few months of the first handshake. The purchase price, structured with a portion held back against post-closing adjustments, sat comfortably within the fund's target range for a platform of this size and revenue profile.

What changed the pace of the file was routine diligence work on the target's corporate records, the kind of review that happens on nearly every acquisition of this size and usually turns up nothing more than minor housekeeping. This time it turned up something real, and it happened largely because nobody on the other side of the table had ever been in a position to check the same records themselves before agreeing to sell.

The gap nobody had noticed

The target's minute book, when we finally received a complete copy partway through diligence, told an inconsistent story that took several readings to fully untangle. Share transfers from years earlier, when a third founding partner had exited the business, had never been properly documented with signed resolutions and updated share registers reflecting the change. Anusha and Senthil believed, and had believed sincerely for years, that they jointly and fully owned the company between them. The paper record did not clearly say so, and in places it actively contradicted what they understood to be true.

Because Anusha and Senthil were self-represented, nobody on their side had ever reviewed the minute book with an acquisition specifically in mind before the deal reached this advanced stage. A lawyer acting for a seller in a deal of this size would typically flag incomplete corporate records early, well before a purchase agreement was drafted around an assumed ownership structure that might not hold up. Without that check on the seller's own side, the buyer's diligence team ended up being the first people ever to notice that the company's own paperwork could not fully confirm who actually had the authority to sell it.

This was not a case of anyone trying to hide anything or misrepresent the ownership deliberately. The gap was ordinary neglect, the kind that quietly accumulates in a closely held company over twenty years when nobody outside the founders' own informal bookkeeping ever has reason or occasion to look closely at the underlying records. But an ordinary gap of this kind can still stop an otherwise straightforward deal cold, because a buyer cannot safely rely on a purchase agreement signed by sellers whose own corporate records do not clearly establish that they own what they are purporting to sell.

The self-represented dynamic changed how this problem had to be handled from a practical standpoint. There was no opposing counsel to negotiate the fix with directly, no one on the other side who would immediately grasp why a set of decades-old share transfers mattered to a deal happening right now. Anusha and Senthil needed the problem explained clearly and patiently enough that they could genuinely understand both the underlying risk and the proposed solution, and they needed to be encouraged, more than once and fairly firmly, to get their own independent legal advice on curing it properly, since a buyer's lawyer fixing a seller's ownership records without the seller having separate independent advice creates its own fairness risk for everyone involved in the transaction.

What we did

1. Flagged the incomplete share transfer records the moment diligence surfaced them, rather than proceeding on the hopeful assumption the gap could simply be cleaned up quickly at closing, because a defect in the chain of title to the shares being sold could unwind the entire transaction later, potentially years after the fund had already invested further capital into the business.
2. Explained the issue directly to Anusha and Senthil ourselves, in plain and careful terms, since there was no opposing lawyer available to translate the concern for them and a founder hearing about a defect in their own ownership records for the first time from the buyer's side needed more than a summary. We walked through exactly what a missing resolution meant in practice and why the buyer's fund could not responsibly close without the gap being fixed first, whatever the delay cost.
3. Strongly recommended, more than once, that Anusha and Senthil retain their own independent counsel to cure the corporate records, explaining candidly that a buyer's lawyer directing a seller's corporate cleanup, without the seller having separate advice of their own, could later be challenged as unfair even if every step was taken in good faith. They engaged their own lawyer within the following two weeks and the process moved forward properly from there.
4. Worked cooperatively with the seller's new counsel to reconstruct the ownership history, confirming through old bank records, historical tax filings, and the founders' own detailed recollection exactly what had happened when the third founder exited years earlier, because getting the record accurate mattered more than getting it done quickly, given how heavily the fund's lenders would ultimately rely on it. That joint effort produced the missing resolutions and an updated share register that finally reflected reality, a documented history neither side could have pieced together working alone.
5. Rebuilt the purchase agreement's representations around the newly corrected ownership picture, rather than treating the cured paperwork as the end of the story, because a documented fix to old records does not by itself protect a buyer if someone outside the deal later challenges the history. The rebuilt agreement added specific warranties tied to the confirmed chain of title and a dedicated indemnity covering the buyer if any part of the older ownership history was ever challenged, layering a contractual remedy on top of the corrected paper record.
6. Negotiated an adjusted holdback amount tied specifically and exclusively to the ownership warranty, rather than accepting either extreme on the table, an uncapped promise backed by nothing or a closing delayed until every historical question was resolved beyond doubt. The holdback gave the buyer's fund a clearly defined pool of funds to draw against if a title problem surfaced after closing, letting the deal proceed on schedule while still keeping that specific risk properly covered rather than quietly absorbed.
7. Designed the platform's new governance structure for the period after closing, because a fund planning several further add-on acquisitions needed real decision-making structure that the target's informal, founder-led approach could never support once outside capital and other people's judgment were involved. The new structure included a board with independent oversight alongside the fund's own representatives and clearly defined decision rights for major operating matters, replacing the entirely informal way Anusha and Senthil had run the company for two decades on instinct and habit.
8. Built employment and incentive terms for a strengthened management team, working closely with the fund's operating partners to identify which of the target's existing staff were worth retaining rather than replacing wholesale once new ownership took over. The resulting package included retention arrangements for key operating staff the fund specifically wanted to keep in place, giving the platform genuine leadership continuity from the day it closed rather than a costly gap while new management was recruited from outside.
9. Ran a final pre-closing verification of the corrected minute book against the closing certificate, treating the earlier fix as something to confirm rather than assume had held, because a single missed resolution at this late stage could have delayed funding at the worst possible moment. The line-by-line check confirmed that every resolution the seller's counsel had prepared matched exactly what the buyer's fund required to satisfy its own lenders, whose debt financing was itself conditional on clean, verifiable corporate authority to sell.

The outcome

The deal closed within about six weeks of the original target date, a delay attributable almost entirely to the time genuinely needed to cure the ownership records properly rather than any breakdown in the underlying negotiation itself. The corrected share register and its supporting resolutions gave the buyer's fund a clean, reliable chain of title it could actually stand behind, backed by specific warranties and a holdback that has not, to date, needed to be drawn against by either side.

Anusha and Senthil, once they had their own counsel properly involved, understood the fix clearly and did not resist it in any meaningful way. The self-represented dynamic that had shaped the early stages of the file resolved itself naturally once independent advice was in place on their side of the table, and the final weeks of negotiation moved in a far more conventional pattern from that point forward, with both sides properly represented and the remaining commercial terms settled through ordinary, professional back and forth rather than one-sided explanation.

The platform now operates under a formal board structure it never had before under its founders, with defined governance processes and a management team retained on terms specifically built to keep them in place through the fund's broader roll-up plans for the region. For Mykola's fund, the deal delivered exactly what it set out to acquire, a functioning platform genuinely ready for further add-on acquisitions, and it did so without the buyer quietly inheriting an ownership defect that could have surfaced years later, at a far more expensive and disruptive moment for everyone involved, including the employees whose jobs depended on the platform's stability.

The debt financing the fund had lined up before the file began closed on the terms originally proposed, since the lender's own conditions around clean corporate authority were satisfied by the corrected records before the funding deadline arrived. Mykola's fund has since begun evaluating the first of several planned add-on acquisitions for the platform, building on the governance and management foundation this file put in place.

What you can learn from this