Preparing Your Business for Sale: A Legal Due Diligence Checklist

Selling a business is a significant milestone, and a complex legal process that requires thoughtful planning. Whether you’re preparing for a share sale or asset sale, early legal due diligence can increase your company’s value, speed up the transaction, and reduce deal risks.

At Hadri Law, we work with business owners across Canada and internationally to structure deals that close smoothly. Here’s a checklist to help you get legally prepared for a successful sale.

Corporate Housekeeping

  • Up-to-date minute book: Ensure corporate records, including shareholder resolutions and director registers, are complete and current.
  • Proper share structure: Confirm that share issuances and transfers are legally documented and compliant.
  • Articles & bylaws: Review your articles of incorporation and by-laws to ensure alignment with your current operations.

Contracts & Agreements

  • Key customer and supplier contracts: Gather signed, valid copies of all major agreements. Check for change-of-control clauses that may require consent before closing.
  • Employment agreements: Ensure employee and contractor agreements are compliant with employment laws. Confirm if there are non-competition or non-solicitation clauses in place.
  • Leases: Landlords may need to consent to assignment or novation. Review lease terms carefully.
  • Loan and credit agreements: Identify any repayment or consent requirements triggered by a sale.

Financial and Tax Matters

  • Financial statements: Have professionally prepared statements for the past 2–3 years readily available.
  • Tax filings and clearances: Ensure corporate tax returns are up to date. Buyers may request CRA tax clearance certificates.
  • Payroll and HST compliance: Confirm payroll deductions and HST/GST remittances are in good standing.

Intellectual Property (IP)

  • Ownership records: Ensure all IP (logos, websites, trademarks, patents) is legally owned by the corporation not founders or third parties.
  • Agreements with developers or creators: If software or content was created by contractors, verify that IP was properly assigned to the business.

Licences and Regulatory Compliance

  • Licences and permits: Confirm all business licenses are active and transferable, especially in regulated industries.
  • Privacy and data policies: Ensure your business complies with privacy laws (such as PIPEDA), particularly if customer data is involved.

Bonus Tip: Consider a Pre-Sale Legal Review

Engaging your lawyer early allows you to resolve red flags before a buyer finds them during their own due diligence. At Hadri Law, we conduct legal audits and work with your accounting and tax professionals to position your business for a smooth, profitable exit.

Thinking of selling your business?
We’d be happy to guide you through the legal side of the process from preparing your documents to negotiating your sale agreement. Call us today 437-974-2374 Email: contact@hadrilaw.com or book your free consultation to get started.

 

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