At Pax Law, our commercial and corporate lawyers provide comprehensive and accessible advice to a wide range of clients.

Whether you are part of a joint venture, partnership, charitable organization, corporation, start-up, property development team, or are an individual entrepreneur, our specialized team can conduct contractual negotiations and draft the requisite documentation to ensure your continued success.

Some of our services include:

  • Corporate reorganization
  • Confidentiality and non-Confidentiality
  • Purchase and sale of businesses
  • Asset acquisition and disposition
  • Dispute resolution
  • Negligence
  • Corporate borrowing and lending
  • Commercial leasing and licensing agreements
  • Bankruptcy and insolvency
  • Tax planning
  • Wills and trusts

Business Contracts

Conducting business in this day and age requires enforceable contracts. There are many business contracts, including sales contracts, services agreements, franchise agreements, distribution agreements, licensing agreements, manufacturing and supply agreements, employment contracts, commercial lending agreements, lease agreements and purchase and sale agreements of real or capital property.

Business Purchase and Sale

A Business Purchase Agreement or Sale of Business Agreement is utilized when an individual or corporation purchases assets or shares of a company. It specifies essential terms with respect to the transaction, including price, payment plan, warranties, and more. A Purchase or Sale Agreement is used during a business acquisition or asset sale.

What is the difference between assets and shares?

Assets are the tangible and intangible property of a business that can be assigned a monetary value, such as client lists, contracts, office furniture, files, inventory, etc.

Shares are portions of ownership in a business that are divided among people and entitle them to profits in the company.

Can assets be excluded from the purchase agreement?

In a purchase agreement, you can choose to leave assets out of the sale. For instance, cash, securities, accounts receivable, and more can be excluded from the contract.

What are the financial arrangements in a Purchase of Business Agreement?

In your payment schedule, you will need to address the following for both the sale of shares and assets:

  • Deposit: the amount of money put towards the price of assets or shares paid prior to the Closing Date.
  • Closing Date: the day payment is made and assets and/or shares are transferred.
  • Payment Options: how the buyer intends to pay the seller, a lump sum, a lump sum plus a Promissory Note for any outstanding amount, or a Promissory Note for the entire amount.
  • Possession Date: the date when the inventory is usually counted and the keys are handed over.

How are shares and assets priced?

Shares can be valued according to two methods:

  • Aggregate Purchase Price: also known as Aggregate Exercise Price, this is the entire price paid for all the shares.
  • Per Share Purchase Price: calculated by assigning a single share price and multiplying it by the total number of shares to equal the total price.

Even if the purchaser is buying all of the assets from a business, each asset should be assigned its own price for tax purposes. Note that some assets may be taxable depending on your jurisdiction.

What are the warranties in a Purchase of Business Agreement?

A warranty is a guarantee made by one party to another. You may choose how long each party is bound by the promises.

Each warranty serves a different purpose:

  • Non-Competition: a clause that ensures the seller does not compete with the purchaser for a set time period after the close of the purchase.
  • Non-Solicitation: a clause that prevents the seller from hiring former employees away from the buyer.
  • Confidentiality Clause: a clause intended to prevent the disclosure of proprietary information to outside parties.
  • Statement of Environmental Compliance: a statement that removes liability from a purchaser by declaring the buyer is in no breach of any environmental laws.

If needed, you can include additional warranties within your purchase agreement.

Who can review the terms in a Business Purchase Agreement?

The party and seller can confirm their representations (statements of fact) through:

  • Officer Certificate: an officer in a corporation or manager of a non-corporate entity
  • Legal Opinion: a lawyer who is hired as a third party to review the terms of the purchase

What is a “condition precedent”?

The term “Conditions Precedent” means that certain obligations must be met prior to closing the purchase deal. There are standard conditions that both parties must complete before executing the Purchase of Business Agreement, which include confirming representations and warranties, as well as a series of other tasks in advance of the contract’s closing date.

Related Documents:
  • Business Plan: a document used to outline a plan for a new business including competitor and market analyses, marketing strategies, and financial plans.
  • Letter of Intent: a non-binding letter used when parties want to have a written understanding for a future agreement to foster good faith.
  • Promissory Note: a document that is similar to a Loan Agreement, but is simpler and often used by family members and friends to document personal loans.

Shareholder Agreements

Commercial Leases