{"id":376,"date":"2019-01-09T16:14:28","date_gmt":"2019-01-09T16:14:28","guid":{"rendered":"http:\/\/www.maleklaflamme.com\/en\/?p=376"},"modified":"2019-01-09T16:14:28","modified_gmt":"2019-01-09T16:14:28","slug":"business-sale-look-hood-first","status":"publish","type":"post","link":"https:\/\/malekavocat.com\/en\/business-sale-look-hood-first\/","title":{"rendered":"Business for sale: look under the hood first!"},"content":{"rendered":"

Instead of launching <\/a>a new business from scratch, many entrepreneurs prefer buying one already in existence. Whether it be purchasing a corporation’s shares <\/a>or buying the bulk of its assets, it is essential that such an important investment be preceded by a thorough review of the target business. In other words, just as you wouldn\u2019t buy a used car without looking under the hood first, you shouldn\u2019t buy a business without carrying out proper due diligence.<\/p>\n

The idea is to gather as much information as possible on the target business\u2019 operations and finances\u00a0to allow the purchaser to make an informed decision on whether it would be wise to follow through with the purchase.<\/p>\n

You will find below some of the items that should be reviewed in most due diligence processes.<\/p>\n

Organization<\/strong><\/p>\n

Articles of incorporation, by-laws and ledgers<\/p>\n

Minute book<\/a> (directors and shareholders\u2019 resolutions)<\/p>\n

Shareholders agreement<\/a><\/p>\n

Financial information<\/strong><\/p>\n

Financial statements (at least the latest 3 to 5 years)<\/p>\n

Financial statements for the year-in-progress<\/p>\n

Budgets<\/p>\n

Various financial reports (cash, accounts, debts, line of credit, etc.)<\/p>\n

Books and records<\/p>\n

Tangible assets<\/strong><\/p>\n

Inventory<\/p>\n

Real estate<\/p>\n

Leases<\/a><\/p>\n

Land titles, insurance, mortgages, permits, etc.<\/p>\n

Intellectual property<\/strong><\/p>\n

List of trademarks, commercial names, patents, copyrights, etc.<\/p>\n

Knowhow, commercial secrets<\/p>\n

Consultation contracts, IP licenses or transfer agreements<\/p>\n

Employees<\/strong><\/p>\n

List of employees, salaries (current and for the last 3 years), bonus paid during the last 3 years and seniority breakdown<\/p>\n

Non-competition, non-solicitation and confidentiality agreements<\/p>\n

Summary of benefits and pensions plans<\/p>\n

Collective bargaining agreement<\/p>\n

Stock option plans<\/p>\n

License et permits<\/strong><\/p>\n

Copies of all permits, licenses or consents issued by a competent authority<\/p>\n

Correspondences and\/or important documents issued by a competent authority<\/p>\n

Environment<\/strong><\/p>\n

Environmental review\u00a0reports<\/p>\n

List of all hazardous substances used by the business in its operations<\/p>\n

Copies of all environmental permits, licenses, consents, correspondences and\/or documents from a competent authority<\/p>\n

Tax<\/strong><\/p>\n

Income statements for the last 3-5 years<\/p>\n

Notice of assessment and other tax-related documents for the last 3-5 years<\/p>\n

Important contracts<\/strong><\/p>\n

Contract with directors, officers or shareholders<\/p>\n

Employment contracts<\/p>\n

Financial contracts (bank loans, financing, line of credit, mortgages, etc.)<\/p>\n

Guarantees offered by the business<\/p>\n

Contracts dealing with current and\/or outstanding terms of payments<\/p>\n

Commercial contracts (distribution, representation, marketing, suppliers, etc.)<\/p>\n

Miscellaneous<\/strong><\/p>\n

Information regarding products and services<\/p>\n

Information regarding customers<\/p>\n

Legal proceedings (threatened or instituted)<\/p>\n

Insurance<\/p>\n

Conclusion<\/strong><\/p>\n

As you can see from the list above, looking under the hood may reveal certain issues, these issues may result in 1) a request to rectify a discrepancy; 2) a reduction of the price initially offered or 3) the outright withdrawal of the offer to purchase. As such, this due diligence process should not be overlooked.<\/p>\n

Any questions or ideas for our next article? Please contact us at the 514-856-5601 (320) or at\u00a0malek@maleklaflamme.ca<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Instead of launching a new business from scratch, many entrepreneurs prefer buying one already in existence. Whether it be purchasing a corporation’s shares or buying the bulk of its assets, it is essential that such an important investment be preceded by a thorough review of the target business. In other words, just as you wouldn\u2019t […]<\/p>\n","protected":false},"author":1,"featured_media":355,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[70,87,89,88],"tags":[57,4,40,19,91,93,42,28,38,20,90,32,16,95,92,94,27,11],"class_list":["post-376","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-buying-business","category-due-diligence","category-sale-of-business","tag-assets","tag-business","tag-business-law","tag-business-lawyer","tag-buying","tag-buying-a-business","tag-commercial-lease","tag-common-shares","tag-contracts","tag-corporation","tag-due-diligence","tag-financing","tag-intellectual-property","tag-review-of-business","tag-sale","tag-sale-of-business","tag-share-capital","tag-trade-marks"],"jetpack_featured_media_url":"https:\/\/malekavocat.com\/en\/wp-content\/uploads\/sites\/2\/2018\/01\/Startup_Malek-Laflamme-avocats.jpg","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9a8Pe-64","_links":{"self":[{"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/posts\/376","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/comments?post=376"}],"version-history":[{"count":2,"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/posts\/376\/revisions"}],"predecessor-version":[{"id":378,"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/posts\/376\/revisions\/378"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/media\/355"}],"wp:attachment":[{"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/media?parent=376"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/categories?post=376"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/malekavocat.com\/en\/wp-json\/wp\/v2\/tags?post=376"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}