How should I structure the sale of my Alberta business?
Transactions come in all shapes and sizes. The set up of a transaction is often driven by tax considerations, and there can be various iterations of transactions from amalgamations to freezes to rollovers. This article is more focused on the basics. For the most basic transaction of a privately held business, there are two options: a share sales or an asset sale.
Why a Share Sale
Properly structured share sales of eligible, privately held Canadian controlled private corporations are eligible for a capital gains exemption, which as of 2019 was $866,912.00. Purchasers can push back against this structure as they end up inheriting all the liabilities in the case of a share purchase. Ensuring the transaction agreement has comprehensive representations and warranties can be a way of effectively dealing with this.
Why an Asset Sale
In an asset sale, parts of the business can be sold, and other parts retained. Purchasers will often push for asset sales as the liabilities will generally not continue in an asset sale, although certain liabilities such as Workers Compensation Board liability if a clearance certificate is not obtained, or potentially employee liability if the business is sold as a going concern without employee severance and pay-in-lieu of notice liability being dealt with.
If you are looking at selling your business, please feel free to contact us for advice.
The information contained in this article is not legal advice. No solicitor client relationship is formed through this article. The reader is encouraged to retain counsel for advice in these matters.