Legal issues when buying a Manitoba business

February 2, 2018


Deciding to buy a business is a high stakes moment for entrepreneurs, with legal ramifications as well as lifestyle changes, financial commitments and a wide array of other issues.

We asked Daniel Ransom, associate at Taylor McCaffrey LLP, how to dodge the most common legal problems when buying into a business.


The Winnipeg Chamber: Where do Manitobans tend to trip up when purchasing a business?

Daniel Ransom: First-time buyers of businesses tend to underestimate the cost and timelines involved with purchasing a business, and sometimes wait too long before seeking professional advice. (Hint: Don’t wait until after you have signed a binding agreement.)

WC: What indicators do you advise clients to look for to know a business is sound?

DR: I typically recommend to buyers that they consult with accounting professionals to assist in their financial analysis of a potential target. If they do not have an accountant, we can refer them to a highly qualified and reputable professional.

WC: How can buyers speed up the purchase process?

DR: My experience is that speeding up the process is not usually an issue. Sellers will often be more than willing to speed up the process. For buyers to adequately assess the risks involved with a potential purchase, however, requires time. Also, the complexity of transactions can vary greatly and, unfortunately, is not dictated by the amount of the purchase price. Even a “straightforward” purchase takes time to do correctly.

I suggest that buyers initiate a discussion with their lawyer and other professional advisors about timing (and costs) early in the process, so that expectations are clear and reasonable.


WC: Are past or pending lawsuits an area of concern?

DR: Any potential liability a purchaser might inherit (or which might attach to purchased assets as a lien) is an area of concern. These concerns are typically addressed through “due diligence” and by the seller’s representations and warranties in the purchase agreement. Due diligence is about discovering and assessing potential risks, and determining or negotiating appropriate measures for dealing with them. Sometimes, the risk is too great and a buyer may be well advised to walk away.

WC: What emotional journey should people expect?

DR: I have had many positive experiences with both buyers and sellers of many kinds of businesses, although the experiences of buyers and sellers tend to be very different. Buyers are embarking on exciting new ventures, while sellers are often moving on to another phase of their lives, which can be bittersweet.

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