When do lawyers get involved and what are some of the things they take care of in a business sale transaction? « Business Brokers BC Blog

When do lawyers get involved and what are some of the things they take care of in a business sale transaction? « Business Brokers BC Blog

When do lawyers get involved and what are some of the things they take care of in a business sale transaction?
Wednesday, May 19th, 2010

A Business Broker/Intermediary typically drafts the Offer to Purchase (OTP) and any Counter Offers. When this has been accepted by both Purchaser and Vendor they would both then retain the services of a lawyer. The Purchaser’s lawyer (PL) prepares a due diligence consent form (which must be signed by the Vendor) and begins the corporate searches, (some of which take some time to get especially the CRA Clearance Certificates. So it is best to begin these early on in the process).

The PL prepares the definitive agreement. This is perhaps one of the most time consuming parts of the transaction. They take the OTP and convert into a definitive agreement, they add representations and warranties to the agreement, they determine the closing procedures and documents to be signed and incorporate them into the agreement.

While this is going on the Vendor’s lawyer (VL) will be remediating the corporate minute book. On average over 90% of those Vendors who have maintained their own minute books end up spending more on a lawyer to fix the deficiencies in it, that they neglected (than if they used a lawyer from the beginning). Once all Vendor corporate resolutions are in order they become part of the closing documents.

As far as a lease is concerned, if there is one in the transaction, it could be either to PL or VL who negotiates the lease or the assignment of the lease (it all depends on who then landlord is). This is perhaps the third most time consuming part of a closing.
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