Solutions

Commercial Law in British Columbia (BC)

British Columbia’s geological position, strong economy, high potential, entrepreneurial culture, investor-friendly environment, and strong legal framework make it one of Canada's most suitable places to buy/sell, and/or operate a business. Regardless of whether one is a first-time entrepreneur getting into business by buying or an experienced business person looking to sell for various reasons, understanding and carefully planning the legal steps are very important for a smooth and secure transaction.

​​

Asset Purchase vs. Share Purchase: Choosing the Right Method in BC

There are two main methods for acquiring a business, which are:

• Asset Purchase: where the buyer acquires the assets of choice such as inventory and/or equipment.

• Share Purchase: where the buyer acquires the shares of the corporation, including assets and liabilities. This method typically requires more analysis and deeper due diligence.

Key Legal Considerations in a Business Buy and Sell Process: Employees

• In an asset purchase, the employment terms do not automatically carry over unless otherwise decided. The buyer can decide to offer new employment to existing employees on the same or on revised terms. It is important to discuss employment matters early on.

• In a share purchase agreement, the employment terms stay uninterrupted unless otherwise decided. The buyer takes over employer's position where employees continue with their existing terms and conditions of employment unless otherwise decided.

Third-Party Consents in the Context of Asset Purchase Transaction

• Many third-party contracts, leases or licenses are not automatically assigned to the buyer after the process. It usually requires getting approval from the third parties if they want to keep the same/similar business relationship with the buyer. For instance, a commercial lease usually requires landlord consent or certain permits (depending on the business activities, including but not limited to liquor license, timber license etc.) requires the regulators approval.

• Avoiding third-party consents may cause the buyer not being able to operate the business.

Restrictive Clauses

• In some types of businesses, for the sake of profitability or other reasons, buyers may insist on non-competing clauses. It means that buyer might ask the seller and his/her employees not to have same or similar business operating for a certain period and/or geographically specific place during and/or after the sale process. 

• These types of clauses need to be assessed with related regulatory requirements in terms of enforceability and reasonableness.

Other Regulatory Frameworks

• It is also very important to note that depending on the type of assets or corporation subject to the sale, there may be several different regulatory rules that need to be followed and considered. For example:

  • Federal Competition Act: Some sectors are heavily regulated in terms of competition. In transactions where such businesses which are subject to strict competition rules are transferred, it may require further assessments and certain approvals from third parties and/or regulatory authorities regarding the Competition Act and other relevant regulations.

  • Federal Investment Canada Act: In the case of a non-Canadian acquiring the control of a Canadian business, there are certain rules in accordance with the Investment Canada Act and other relevant regulations.

Legal Help We Can Provide During Acquisition and Selling

• Assess the ownership structure of the business to be sold or bought, transaction type, and overall consequences.

• Review of corporate records, financials, contracts, employment, and any possible risks that might arise in the future because of the agreements of the company subject to purchase at the due diligence stage.

•  Draft key legal documents and clauses include but not limited to purchase agreement, warranties, indemnities, non-competition and confidentiality agreements, and financing provisions.

• Advice on consents, approvals, and handle permits, licenses, and assignments.

Legal Support for your Business in BC

Our firm offers continuous legal support before, during and after the transaction to ensure legal compliance and avoid potential legal disputes. Please feel free to contact us at mail@atasoylaw.ca if you have any other questions regarding your business needs in British Columbia.

​

Disclaimer:

The content of this blog post is provided for informational purposes only and does not constitute legal advice. It is not intended to, and does not, establish a solicitor–client relationship. Matters of business law, including but not limited to business transactions, are inherently complex and fact-dependent. The appropriate legal analysis and outcome will vary according to the particular circumstances of each matter.