Rather than starting a business from scratch, you may be interested in acquiring in an existing business or venture.
Let us ensure that we assist with the appropriate due diligence pre-acquisitions and any agreements that may be required in order to complete your deal.
Acquisition of a Business – Purchase of Shares – In a share purchase transaction, a buyer acquires the shares of a corporation that owns assets and carries on business. The buyer of the shares does not directly or indirectly acquire the assets or liabilities of the corporation whose shares are being sold. However, the value of the shares depends on the underlying value of the assets and liabilities of the corporation.
Preference for this type of transaction for the buyer includes that initial purchase price when purchasing shares may be lower than an asset purchase, there is no GST payable on a purchase of shares, a share purchase avoids the payment of a sales tax levied by jurisdictions that have a sales tax, processing the transaction may be less expensive because the buyer will not incur certain fees such as registering security against assets or land titles registration costs and a share purchase minimizes the disruption to customers, suppliers and employees of the business.
From the seller’s point of view, a seller may receive more net after tax sales proceeds in a share sale then when compared to an asset sale/purchase transaction and there are no restrictions that may stop a sale, unlike with a sale of assets.
Full due diligence from both sides is required in order to properly protect from the risks associated with the transaction.
Acquisition of a Business – Asset Purchase – The buyer may prefer to purchase assets directly instead of the shares because they would only be accountable for liabilities associated with particular assets, avoiding unsecured creditors only through the asset purchase and allowance for certain income tax advantages. The seller may prefer to purchase assets
Contact one of our corporate lawyers today.