Asset purchase
Buying listed assets of a business from their owner. Liabilities stay with the seller unless assumed; contracts, licences and employees must be moved.
Bring-down certificate
The seller's closing-day certificate confirming its warranties are still true and its pre-closing covenants performed.
Read the answer →Bulk Sales Act
A former Ontario statute requiring creditor statements on sales of business assets. Repealed 22 March 2017; not current law.
Read the answer →Change-of-control clause
A contract or lease term that treats a change in who controls the tenant or counterparty as an assignment needing consent, or as grounds to terminate.
Read the answer →Disclosure document
The document a franchisor must deliver under the Arthur Wishart Act at least 14 days before a franchisee signs or pays, with the contents set by regulation.
Read the answer →Due diligence
The buyer's investigation of the business's finances, contracts, employees, premises, licences and legal exposure before committing to close.
Earn-out
A part of the price paid later only if the business hits agreed targets after closing. Common where buyer and seller disagree on value.
Read the answer →Exclusivity (no-shop)
A binding promise by the seller not to negotiate with other buyers for a set period while the buyer does diligence.
General security agreement
A lender's security over all of a borrower's present and future personal property, perfected by registration under the Personal Property Security Act.
Goodwill
The value of a business beyond its identifiable assets: reputation, customer relationships, location and systems. Taxed differently from equipment.
Read the answer →Holdback (escrow)
Part of the price kept in a lawyer's trust account after closing so that a valid warranty or indemnity claim can be paid from it.
Read the answer →Indemnity cap and basket
The cap limits how much a seller can be made to pay for breaches; the basket is the threshold of losses below which no claim can be made.
Read the answer →Landlord consent
The landlord's written agreement to the assignment of a lease or a change of control of the tenant, which most commercial leases require.
Letter of intent
A short document recording price, structure and main terms before the purchase agreement. Usually non-binding on the deal, binding on confidentiality and exclusivity.
Read the answer →PPSA search
A search of Ontario's Personal Property Security Registration system for security registered against the seller's equipment, inventory or receivables.
Read the answer →Purchase price allocation
How the price in an asset deal is divided among equipment, inventory, goodwill and other assets. It drives each side's tax result and the CRA can challenge it.
Read the answer →Representations and warranties
The seller's statements of fact about the business in the purchase agreement. If one is untrue, the buyer's remedy is usually an indemnity claim.
Read the answer →Section 167 election
A joint election under the Excise Tax Act so that no HST is charged on the sale of a business where the buyer acquires substantially all it needs to carry it on.
Read the answer →Share purchase
Buying the shares of the corporation that owns the business. The corporation, with all its contracts, history and liabilities, carries on under new ownership.
Successor employer
A buyer treated as continuing the seller's employment relationship, so employees' prior service counts under the Employment Standards Act, 2000 and a collective agreement binds.
Read the answer →Vendor take-back
Financing from the seller: part of the price is paid over time under a promissory note, often secured and usually ranked behind the bank.
Read the answer →Working capital adjustment
A post-closing price adjustment if receivables, inventory and payables delivered differ from the target set in the agreement.
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