If you are looking to buy a business or are deciding to sell yours, there are many steps you must take to ensure a smooth transaction. These include determining how to purchase or sell the business, signing an Offer to Purchase, completing due diligence, preparing documents to complete the deal, raising the purchase money, and closing the deal.
There are two ways to buy or sell a business:
1) by purchasing the shares of the company; or
2) by purchasing the assets of the company.
Share purchases involve the purchase of all (or the majority) of the shares of a company that owns a business. In other words, the purchaser acquires the assets of a company through the purchase of its shares. If a company has more than one shareholder it is important to inquire as to the transferability of the relevant shares. Other shareholders may have the right of first refusal (e.g. in the articles of incorporation or shareholder agreement) or may be required to give consent before a sale can occur.
Due diligence is a crucial process in share purchase transactions. Typically, the purchaser focuses on topics such as whether (or to what extent):
Asset purchases involve the purchase of all, or part, of the assets of a business. In a typical asset purchase, the shares of the vendor do not form part of the transaction. Asset purchases are often preferred by buyers, as it provides them with flexibility to pick and choose which assets they wish to acquire and, to a much greater extent than in a share purchase, avoid assuming a company’s liabilities.
As with share purchases, due diligence forms an integral part of an asset-based transaction for a purchaser and typically includes issues such as whether (or to what extent):
For more information on buying or selling your business, please contact Satinder Dhaliwal Law Corporation at 604-360-0516 or firstname.lastname@example.org.