Kedge Anchor Law | Business Purchase Guidance

Buying a Business? Know What You Are Actually Buying.

The purchase price is only one part of a business acquisition. Existing obligations, contracts, employees, leases, debts, intellectual property, and legal disputes may affect the true value and risk of the transaction.

A careful legal review before closing may help you understand what is included in the purchase, what obligations may continue after the sale, and which issues should be addressed in the purchase agreement.

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Business Acquisition Guidance

A Successful Business Can Still Carry Hidden Risk

Financial statements and sales figures may make a business appear attractive, but they do not always reveal the complete legal picture. Before committing to a purchase, a buyer should understand what assets, obligations, rights, and liabilities may be transferred as part of the transaction.

What Legal Due Diligence May Review

Legal due diligence involves reviewing records, agreements, and potential liabilities that may affect the business or the proposed transaction.

Corporate records and ownership information
Material customer and supplier contracts
Commercial leases and property obligations
Employment agreements and workplace liabilities
Intellectual property ownership and licensing
Loans, security interests, and financial obligations
Pending litigation, complaints, or disputes
Licences, permits, and regulatory compliance

Issues That May Affect the Purchase

A business may have obligations that are not obvious from its public-facing operations or financial performance.

Contracts that cannot be assigned without consent
Lease defaults or upcoming rent increases
Unpaid employee compensation or termination exposure
Intellectual property owned by a founder or third party
Outstanding tax, financing, or creditor obligations
Personal guarantees connected to existing agreements
Customer concentration or restrictive contract terms
Regulatory concerns that may affect future operations

Transaction Structure

Are You Buying Assets or Shares?

The structure of the transaction may significantly affect which assets, contracts, obligations, and liabilities are transferred to the buyer.

Asset Purchase

In an asset purchase, the buyer generally purchases selected assets of the business, such as equipment, inventory, contracts, customer lists, intellectual property, or goodwill.

The purchase agreement should clearly identify which assets are included, which liabilities are assumed, and which obligations remain with the seller.

Share Purchase

In a share purchase, the buyer acquires the shares of the corporation. The corporation continues to own its assets and remains responsible for its existing contracts, obligations, and liabilities.

Because the legal entity continues after closing, a share purchase may require a detailed review of the corporation’s past and current legal exposure.

Important Consideration

The Seller’s Promises Should Be Reflected in the Agreement

Verbal assurances made during negotiations may not provide sufficient protection after closing. Important statements about revenue, contracts, employees, debts, ownership, compliance, and disputes should be properly addressed in the written purchase agreement.

Representations, warranties, indemnities, closing conditions, and holdback provisions may help allocate risk between the buyer and seller.

Questions Before Closing

Know What to Ask Before You Commit

These questions may help identify matters that deserve further review before the transaction is finalized.

Who legally owns the assets being sold?

Are any business assets subject to liens or security interests?

Can key contracts be transferred to the buyer?

Does the landlord need to approve a lease assignment?

Are employees owed vacation pay, bonuses, or other compensation?

Are there pending lawsuits, complaints, or regulatory concerns?

Does the business own its trademarks, website, software, and content?

Are there debts or obligations that may continue after closing?

Will the seller be restricted from competing after the sale?

What happens if important information provided by the seller is inaccurate?

Legal Review Process

A Clearer Path to Closing

The specific process will depend on the transaction, the business, and the documents already prepared by the parties.

Review the Proposed Deal

Review the letter of intent, purchase structure, proposed price, financing arrangements, and important deal terms.

Identify Legal Risks

Examine corporate records, contracts, leases, employees, intellectual property, obligations, and potential disputes.

Address the Risks in Writing

Use the purchase agreement and closing documents to clarify what is being purchased and allocate responsibility between the parties.

Understand the Business Before You Buy It.

A legal review may help you identify hidden obligations, understand the proposed transaction, and address important risks before signing the purchase agreement or completing the acquisition.

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Business Purchase Consultation Guidance