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


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.