How do I negotiate the terms of the purchase agreement?

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Negotiating a business purchase agreement requires a systematic approach.

We recommend engaging experienced legal and financial professionals to guide you through the process. A recommended step to begin with is to send a non-binding Letter of Intent (LOI) that outlines key terms and conduct thorough due diligence to uncover any issues.

Either on your own or with the assistance of counsel, negotiate the purchase price, terms, and financing, taking into account asset and liability allocation, as well as ongoing involvement by the seller. Ensure you address essential legal components, including whether it is an asset or share purchase, employee considerations, tax considerations, and non-disclosure and non-compete clauses.

Finally, ensure the agreement is meticulously reviewed by your counsel before the closing date. A well-structured purchase agreement and professional guidance are critical for a successful business acquisition and can help avoid headaches and pitfalls in the future.

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What contracts and agreements do I need to review or create during the acquisition process?

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The acquisition of a business is a multi-faceted endeavour, where understanding and navigating a web of contracts and agreements is paramount. At the heart of the acquisition process lies the Purchase Agreement. This all-encompassing contract outlines the terms and conditions of the sale, from the purchase price to the assets and liabilities to be transferred. It is the lynchpin of the transaction and warrants thorough review. Employee and customer relationships are the lifeblood of any business. Consequently, review and, in the event of an asset sale, amend Employment Contracts to retain key staff, and to ensure you are aware of the existing contracts. If you are purchasing the shares of a business, you will want to review the employment contracts as you will inherit the employees on the same terms. Analyze Customer Contracts to ensure they are transferrable, and address any clauses related to change of control. Likewise, scrutinize Supplier Contracts, assess their transferability, and gauge the favorability of their terms. Lease Agreements for the business premises should be reviewed, and you should secure assurance that they can be assigned to the new owner. Intellectual property is another critical facet, and if applicable, inspect related agreements to ensure a seamless transition of ownership. For franchises, study the Franchise Agreement thoroughly and secure approval from the franchisor for the change in ownership. Do not forget to examine any outstanding Loan Agreements, ensure you understand their terms, and determine your responsibility for repayment. Furthermore, look into existing insurance policies to assess coverage and determine the need for additional coverage, such as liability insurance.

The art of crafting a successful business acquisition also involves careful consideration of Warranties and Representations from the seller, employment and severance agreements for affected employees, Non-Competition and Non-Disclosure Agreements to safeguard sensitive information, and if applicable, agreements related to environmental and regulatory compliance. In this intricate dance of contracts and agreements, seeking guidance from legal counsel is strongly advised. The exact array of agreements may vary depending on the nature of the business, industry, and unique circumstances of the acquisition, so meticulous attention to detail is the name of the game when you choose to step into the world of business acquisition, and retaining legal and accounting professionals can ensure you are protecting your interests.

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How can I protect myself from assuming the seller’s liabilities?

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When acquiring a business, whether in British Columbia or elsewhere, safeguarding yourself from inheriting the seller’s liabilities is of paramount importance. Several strategies can help mitigate these risks.

First, a comprehensive due diligence process is vital, specifically you will want to examine the seller’s financial, legal, and operational history with expert assistance from lawyers and accountants. A well-structured purchase agreement is equally essential, and it should delineate which liabilities you will assume and which the seller will retain. Including indemnification clauses within this agreement will offer protection by allowing you to seek compensation for any unforeseen liabilities after the sale.

Choosing an asset purchase over a share purchase can limit exposure to the seller’s liabilities, while holdback provisions and environmental assessments may provide further security. You will want to carefully review existing contracts, renegotiate where applicable, and invest in insurance coverage to guard against unforeseen liabilities. Finally, legal guidance is indispensable to ensure that your interests are comprehensively protected throughout the acquisition process. Tailoring these strategies to your specific situation is key, underscoring the importance of diligence, knowledge, and proactive measures to minimize the risk of assuming unwanted liabilities.

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What due diligence should I perform before buying a business?

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It is essential to conduct due diligence when buying a business to ensure you are aware of any potential liabilities, legal issues, or other considerations related to the specific business you are acquiring. Consulting with your lawyer and your accountant is highly recommended to make an informed decision based on your unique circumstances.

Before buying a business, you should focus on the financial, legal, and operational aspects of the business you wish to purchase. You will want to ensure that you can receive a clear title to any assets and/or shares. It is important to examine the company’s financial statements, tax records, and outstanding debts. You will also want to review all relevant contracts, corporate records, and potential legal disputes. You should also assess operational efficiency and the workforce and investigate customer relationships, market positioning, and competitive landscape. You should analyze supplier contracts and potential supply chain risks. If applicable, conduct environmental and property assessments, and ensure intellectual property ownership is clear, if applicable. Examine employee contracts, potential severance obligations, and compliance with labor regulations. If premises are leased, review the vendor’s lease obligations and the right of the vendor to assign the lease to you.

You should also verify the business’s compliance with any industry-specific regulations, licenses, and permits. You may also wish to seek customer feedback and references. Another step you should consider is to evaluate the technology infrastructure and IT systems. Review future financial projections and the business’s legal ownership and structure. You should confirm the transferability of supplier agreements and licenses to ensure you are getting the benefit of the business you are purchasing. We recommend engaging professionals for expert assistance and insights throughout the process, including lawyers and accountants. Thorough due diligence is essential to make an informed and secure business acquisition.

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What type of legal structure is best for buying a business?

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The choice of a legal structure for buying a business depends on various factors, including your business goals, tax considerations, liability concerns, and the nature of the business you’re acquiring.

Here are some common legal structures you might consider:

1) Sole Proprietorship: If you plan to operate a business by yourself and want a simple structure, a sole proprietorship may be suitable. However, keep in mind that you will be personally liable for the business’s debts and obligations. An advantage is that you may write off losses from your business against your personal income tax, so a sole proprietorship may be a good choice when you expect there to be operating losses.

2) Partnership: If you are buying a business with one or more partners, a general partnership might be a suitable option. A partnership does not require a formal agreement, and can be presumed when two or more persons are embarking on a business venture together, however, having a written partnership agreement is advisable, as both parties can set out clear expectations. Partnerships offer shared ownership and management responsibilities and are similar to a sole proprietorship, however, a drawback is that the partners are typically personally liable for the partnership’s debts.

3) Corporation: Setting up a corporation can provide limited liability protection for the owners (shareholders) and may offer potential tax advantages. They are more expensive to set up and maintain than either a sole proprietorship or a partnership. Corporations are a common choice for larger businesses. In BC, you can incorporate under the Business Corporations Act (BCA), or you may choose to incorporate as a federal corporation under the Canada Business Corporations Act (CBCA).

4) Cooperative: If you plan to involve the employees or customers in the ownership and decision-making, you might consider a cooperative structure. Cooperative structures distribute both the risk and the reward among its members.

The choice between the various available structures should be made with the assistance of legal and accounting professionals who can assess your specific situation. There are other potential limited liability options for structures to consider based on the unique circumstances of each business.

Consider factors such as liability protection, tax implications, the number of owners, and your long-term business goals. Ensuring to consult with professionals when considering how to structure your business can help reduce potential issues down the road, as each business is different and your unique circumstances should be taken into account when deciding on a business structure.

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An Eye for an Eye: False Accusations by one Parent Against the Other in Family Law Proceedings

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There are multiple possible outcomes and effects that may come from a parent making false accusations/allegations against the other parent, and none are positive for the accusing parent. These outcomes may range from increased costs against the accusing parent to having the Ministry for Child and Family Development become involved with the family, and the accusing parent may potentially lose their parenting time.

False accusations by one parent against another, or against professionals employed in the process of the proceedings, may reflect poorly on the accusing parent’s ability to parent their child. Making false accusations has been a factor demonstrating the accusing parent’s inability to act in the child’s best interests, which is the only relevant factor when the Court is considering how to allocate parenting responsibilities and parenting time (previously known as custody). Making untrue and harmful accusations against the other parent has been found by the Court as evidence that the accusing parent is attempting to alienate the child from the other parent, an act that cannot be considered to be in the child’s best interest. Parental alienation may occur when one parent tries to get a child to hate or be fearful of the other parent. In trying to make the other parent look bad through untrue statements or accusations, the accusing parent is more likely to be hurting their own case and showing to the court that they are unable to behave in their child’s best interests. In the vast majority of cases, the child’s best interest includes fostering a positive relationship with both parents. When a parent shows they will go to extreme lengths to hurt the other parent, it demonstrates to the Court that the accusing parent is unable to put their child’s needs before their own.

When a parent makes false accusations or allegations against the other parent, the Ministry of Child and Family Development may have to become involved with the family. Depending on the nature of the false accusations/allegations, there may be serious disruptions to the child’s life. The Ministry may stay involved if they determine that the accusing parent is attempting to alienate the child from the other parent, and it may be found that the accusing parent is partaking in family violence by trying to weaponize the court process or Ministry against the other parent or the child. This kind of behaviour is not in the best interests of the child, and the accusing parent may have their parenting time supervised, restricted, or removed until they can show they can genuinely act in the best interests of the child.

The accusing parent may also have special costs awarded against them based on their conduct during the family law proceedings, which includes whether they have made false accusations against the other parent, and the nature and severity of those accusations. Generally, when a matter is brought to court, the successful party is entitled to costs. Costs awarded at Court are not intended to completely cover the legal costs of the successful party but to provide a set-off. Costs are generally set in accordance with the Tariff scale and may be increased or decreased slightly based on the complexity of the matter. In certain extreme circumstances, an unsuccessful party may be forced to pay what was previously known as solicitor-client costs, now known as special costs.

Special costs are awarded when the conduct of a party was so egregious that the courts finds that the successful party should be indemnified for all or most of their legal fees in lieu of using the Tariff scale. False accusations and allegations in many cases are likely to fall into this category, especially when there is a pattern of behaviour by the accusing parent. In other words, if a party to lawsuit conducts themselves in a way that earns the rebuke of the Court, they may be paying for both their own and the other party’s legal fees. False accusations by parents in family law proceedings have been found to be a factor the court may take into account when awarding special costs. Considering the steep costs of taking a matter to trial, this can cost the accusing parent tens of thousands of dollars just in paying for the other parent’s costs, in addition to their own costs.

To summarize, false accusations and allegations may hurt the accused parent, will almost certainly hurt the child in question, and will likely to have a profound negative effect on the parent making the false accusations/allegations. The falsely accusing parent may have special costs awarded against them, and they may lose parenting time and responsibilities with their child. They may have to be supervised when spending time with their child, or not be able to see their child at all. Parents must be able to show that they can and will act in the child’s best interest, and false accusations and allegations against the other parent (or against professionals employed during the family law proceedings such as counsellors, doctors, and ministry employees) demonstrates a parent’s inability to put the needs of their child before their own.

 

 

 

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What if there are issues with the Will or concerns about its validity?

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Whereas some issues with a Will can be rectified, others will result in the Will being held as invalid.

Issues concerning undue influence or lack of capacity can have the effect of invalidating a Will. A Will may also be invalid if it does not comply with s.37 of the British Columbia Wills Estates and Succession Act (“WESA”) which states that the Will must be:

(a) In writing,

(b) Signed at its end by the Will-maker or the signature at the end must be acknowledged by the Will-maker as his or hers, in the presence of 2 or more witnesses present at the same time, and

(c) Signed by 2 or more of the witnesses in the presence of the Will-maker.

Further, a Will that contains unclear provisions may be found to be invalid or the particular gifts that are the subject of the unclear provisions may fail unless they can be cured under certain provisions in WESA. Other issues with a Will, such as formality requirements, may be able to be fixed through provisions of WESA.

Under section 58 of WESA, if a Will does not satisfy the formal requirement, the court has discretion to cure the formal deficiencies. This generally involves ascertaining the Will-maker’s testamentary intentions.

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How should I communicate with beneficiaries and potential heirs of the estate?

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Executors should initiate conversations promptly after the passing of the deceased, providing clear information about the probate process, including steps, timelines, potential delays, and the roles involved.

Written communication, such as formal letters or emails, not only ensures that details are documented but also provides beneficiaries with a reference point. An executor is obligated to keep beneficiaries “reasonably” informed throughout the estate administration process and to answer inquiries made by beneficiaries in a timely manner. What is reasonable depends on the circumstances and estate administration can take months or years to complete.

If the executor is not communicating with beneficiaries and delay is becoming an issue, a court application can be brought to compel the executor to complete the administration of the estate and distribute the estate’s assets.

Beneficiaries should be provided with enough information to ensure the estate administration process is progressing and that the estate is being administered in accordance with the terms of the Will. At the start of the process, the executor must provide notice to each person with an interest in the estate. This notice should indicate what the beneficiary is entitled to pursuant to the terms of the Will.

Delivery may be by personal delivery, ordinary mail, email, or other electronic means to the address provided by the person for that purpose. There is no requirement to prove receipt of a notice that has been mailed.

However, before mailing, the executor must make reasonable efforts to verify that the address is current, even when the Will-maker has long been out of touch, and if it is not, make an effort to trace the current address.

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What documents do I need to gather and file in relation to the probate process?

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The documents required for a typical application for probate are:

1. A submission for an estate grant;

2. An affidavit of the applicant for grant of probate from the applicant;

3. If there are two or more applicants, an affidavit in support of an application for an estate grant from each applicant;

4. Two copies of a certificate of Wills notice search;

5. Any affidavit or material required to deal with issues relating to the Will, including proof of due execution, the effect of interlineations or alterations, or electronic Wills;

6. One or more affidavits of delivery that, collectively, confirm that notice was delivered to all persons to whom notice must be given;

7. An affidavit of assets and liabilities from the applicant;

8. Two exact copies of the Will or a copy of the Will being submitted;

9. The written comments of the Public Guardian and Trustee if notice of the application must be given to the Public Guardian and Trustee on behalf of a minor or a mentally incompetent person;

10. A draft of the estate grant or authorization to obtain estate information (although drafts may not be required at some registries such as Vancouver which will prepare these documents internally);

11. A lawyer’s trust cheque, certified cheque, or bank draft (the court registry will not accept personal cheques) for the initial probate filing fee in the amount of $200, to be submitted with the application (note that no filing fee is payable if the estate does not exceed $25,000 in value);

12. A lawyer’s trust cheque, certified cheque, or bank draft for the balance of the probate fee, is to be submitted when the probate registry has advised that the application has been approved and confirmed the amount of the fee.

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Are there any potential legal disputes or claims that I should be prepared for?

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As an executor, there are many potential legal disputes or claims that may arise. One common challenge lies in disputes concerning the validity of the Will, where allegations of undue influence or lack of mental capacity can lead to litigation. Other issues with the Will can include problems with formalities, as well as unclear provisions in the Will.

In BC, an issue that can arise is Wills variation claims by the spouse or children of the deceased. The definition of “child” in this context includes adult children.

Under section 60 of the British Columbia Wills Estates and Succession Act, a spouse or child may commence a proceeding to vary a Will that does not adequately provide for the spouse or child’s proper maintenance and support.

In this situation, the court may order the provision be made that it thinks is “adequate, just and equitable” in the circumstances. If a Wills variation proceeding is commenced, a distribution of the estate may only occur with the consent of the court.

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