PURCHASING AND SELLING A BUSINESS
Many businessmen when arriving in Canada decide to purchase an existing Canadian business.
There are generally two ways to purchase a business. You can purchase the assets of the business or the shares of the company that owns the business.
The benefit of purchasing the assets is you limit the amount of hidden liabilities you acquire. You can examine each group of assets. You can check to see that there are no mortgages or other types of securities or charges registered against the assets. Generally after this due diligence and checking has been done there are not hidden liabilities.
The negative aspect of purchasing assets is you do not get the benefit of the good will associated with the name of the business or previous company. Also if you are seeking a tax loss you cannot acquire any tax loss of the previous company to be used to lower taxes.
The benefit of purchasing the shares of the company is you can acquire the goodwill associated with the name of the company and any tax losses. When purchasing the shares of an existing company there are many different types of searches and checks that must be made in order to ensure that there are no mortgages, charges or liabilities that attach to the company or the company’s assets. In particular you need to check the special priority given to any mortgage or charge placed by the Federal or Provincial government against the company or the assets of the company. These government charges sometimes obtain a “super priority” that gives them precedence over any other charge.
Purchasing or selling a business is complicated and caution and due diligence must be exercised to ensure you are able to buy what you thought you were buying or get paid what you thought you would be receiving.
Brian Edward Tadayoshi Tsuji
Canadian Immigration Lawyer
2800 Park Place
666 Burrard Street
Vancouver, British Columbia, Canada, V6C 2Z7
Tel:(604) 643-6496 Fax:(604) 605-3596