Are you looking for help with completing an asset purchase in Ontario? Connect with a lawyer.

Purchasing assets can be strategic for businesses looking to expand their operations or acquire valuable resources in Ontario.

However, careful consideration and attention to detail are required to ensure the process is conducted smoothly. This guide provides some tips and considerations for asset purchases in Ontario.

Identify the Assets You Need

It’s essential to clearly understand the assets you must acquire before embarking on the asset purchase process. Businesses can focus their efforts and resources on finding the right opportunities by identifying the specific assets required.

According to the Ontario Ministry of Economic Development, Job Creation, and Trade, over 4,800 merger and acquisition deals were completed in Ontario in 2020, emphasizing the importance of strategically pursuing assets.

Conduct Due Diligence

Conducting due diligence is an essential step in the asset purchase process. Due diligence involves gathering and analyzing information about the assets businesses consider acquiring and any associated risks or liabilities.

According to a report by Deloitte, 80% of buyers and sellers surveyed said that conducting due diligence was critical to the success of an M&A transaction.

Consider Financing Options For Ontario Asset Purchases

Financing is another critical consideration in the asset purchase process. Various options include cash purchases, asset-based lending, and traditional bank loans. Choosing the right financing option can help businesses manage cash flow and minimize risk.

According to the Canadian Federation of Independent Business, 47% of small business owners in Canada have used business financing in the past year, emphasizing the importance of considering financing options in the asset purchase process.

Seek Legal and Financial Advice

The asset purchase process can be complex, mainly if businesses deal with multiple assets or high-value transactions. Seeking legal and financial advice can help companies make informed decisions and protect their interests.

According to a survey by Thomson Reuters, 72% of legal professionals have seen an increase in M&A activity in recent years, highlighting the importance of working with experienced professionals who understand the nuances of the asset purchase process.

Tax Implications of Ontario Asset Procurement

Tax implications are an essential consideration in asset purchase transactions. Depending on the assets being acquired and the deal’s structure, the consequences may need to be carefully considered.

Working with a tax professional can help ensure businesses know of potential tax liabilities and can structure the deal to minimize their tax burden.

Employee Impact

If businesses are acquiring a company with employees, they must consider the impact on those employees. This includes both the impact on the employees of the company being acquired and any impact on the businesses’ existing employees.

Proper communication and planning can help minimize disruptions and ensure a smooth transition.

According to data from Statistics Canada, there were over 470,000 employer businesses in Ontario in 2020, highlighting the potential impact of employee considerations in asset purchase transactions.

Intellectual Property Rights

Intellectual property rights can be a valuable asset in many businesses. If businesses acquire a company or assets that include intellectual property, it’s essential to ensure they obtain the appropriate rights and protections.

This can help ensure that businesses fully realize these assets’ value and avoid future legal issues.

Asset purchases in Ontario can be a complex process that requires careful consideration and attention to detail.

Identifying the right assets, conducting due diligence, considering financing options, seeking legal and financial advice, and carefully considering tax implications, employee impact, and intellectual property rights are all crucial steps to ensuring the transaction’s success.

By considering these tips, businesses can confidently navigate the asset purchase process and achieve their strategic goals.

Purchasing Assets in Ontario

There is a difference between an asset purchase and a share purchase. You have the option when you are purchasing a business. Many people think you purchase a company and all its liabilities. Many companies do not do it this way. Instead, people prefer to do asset sales.

People mainly do this to avoid any company debts or liabilities. An asset purchase is when the buyer purchases a company’s assets by selling its business.

It’s not only a business term but also a legal term. Legality is vital because asset ownership is transferred to a new owner, along with which liabilities are to be assumed.

An asset purchase is effected through an asset purchase agreement. It’s best to consult a lawyer in Ontario when drafting an asset purchase agreement. This will make sure all Ontario laws are followed.

An asset purchase involves selling individual assets, while a share purchase involves buying 100% of a company’s shares. Both are important, so it’s important to do them correctly.

Have you considered capital gains, transfer tax, due diligence, tax implications, or income tax? A lawyer can provide legal advice about these things.

Why it’s essential to draft an Asset Purchase Agreement properly

It’s important to include lots of details in the agreement. The more details, the better to define every condition, scope, and coverage. You do not want to get stuck paying the company’s liabilities. If they have a judgment against them for $300,000 and you assume their debts, you will have to pay the $300K.

You need a lawyer to do due diligence on the deal. You might save $1500 by not hiring a lawyer, but you will lose hundreds of thousands of dollars. That is a bad trade.

Benefits of an Asset Purchase Agreement:

• Prevent misunderstandings and avoid disputes
• Costing/Pricing
• Assets purchased (scope, quantity)
• Conditions, if any, for each asset purchased
• Create a record/document enforceable by law
• Avoid any costly and inconvenient litigation that may arise

An asset purchase involves selling individual assets. A share purchase involves buying 100% of a company’s shares, as well as title to assets and title to liabilities.

How a lawyer helps in drafting an Asset Purchase Agreement in Ontario

There are many different reasons that a company owner might want to sell individual assets. Perhaps these assets are no longer used in day-to-day operations, or their sale could help facilitate new investments in more updated assets.

While the initial decision to sell assets might originate with the company owner, an experienced lawyer knowledgeable about asset purchase issues should be used for the remainder of the sale process to ensure that all the correct details have been addressed.

Far too many pitfalls could occur without the right legal guidance and the support of an asset purchase attorney from the very beginning.

Retain ownership of the company

Don’t hesitate to get advice from someone who knows the landscape and can assist you in maximizing the value of an asset purchase transaction while protecting your interests.

Given the flexibility of retaining ownership of the company while still removing assets from the company’s ownership and using the sale proceeds for other investments. An asset purchase can be a wise choice for your business if you want to retain control.

Buyers also enjoy benefits in asset sales because, compared with stock sales, a buyer avoids taking on much liability in the transaction.

Non-competition and non-solicitation covenants

Lawyer’s knowledge of business laws and contract laws in Ontario:

• Making sure a purchase transaction is completed without breaking any laws
• Important in preventing fraud

Our lawyers are proficient at using a checklist to draft a complete and comprehensive asset purchase agreement.
They can guide assumed liabilities and excluded liabilities. The lawyers know the limitations and qualifications of representations and warranties.

Other related legal concerns:

• Non-competition and non-solicitation covenants
• Indemnities, survival periods
• Conditions of Closing

Your lawyer will review all documents and records provided. They will then provide legal advice about what kind of purchase agreement you should use.

PRO TIP :

“An Asset Purchase Agreement transforms a business deal into a legally binding contract that protects the parties’ rights.”