When preparing to sell a business in Sarnia or across Lambton County, owners naturally focus on the purchase price, valuation multiples, and finding the right buyer. However, the operational contracts that keep your business running smoothly deserve equal attention before you sign on the dotted line.
Overlooking key contract terms can cause unexpected deal delays, costly renegotiations, or post-closing liabilities. To ensure a seamless transaction, here are the essential contract details you should review well before closing.
1. Customer and Supplier Agreements
Your revenue depends on your clients, and your operations depend on your suppliers. When reviewing these agreements, pay close attention to:
- Assignability: Can these contracts be transferred to a new owner automatically, or do they require the third party’s explicit written consent?
- Termination Clauses: Are there clauses that allow clients or vendors to cancel their agreements upon a change in business ownership?
2. Your Commercial Lease
If your business operates out of a physical storefront, office, or industrial space in Sarnia, the commercial lease is often one of its most valuable assets.
- Term and Renewal Options: Check how much time remains on the lease and whether renewal options are secure.
- Landlord Consent: Most Ontario commercial leases explicitly prohibit assigning or subletting the space without the landlord’s prior written approval.
- Personal Guarantees: Remember that selling your corporation does not automatically release you from a personal guarantee on the lease unless formally negotiated and discharged by the landlord.
3. Equipment Leases and Financing Contracts
Businesses often rely on leased equipment, machinery, technology, or vehicle fleets. Review these agreements to determine:
- Whether the leases can be successfully assigned to the buyer, or if the equipment must be paid out in full upon closing.
- Any hidden payout penalties or transfer fees associated with early termination or change-of-control provisions.
4. Employee and Contractor Contracts
Your workforce is critical to business continuity. Review existing employment agreements, independent contractor arrangements, and any collective agreements (if applicable) to understand liabilities related to severance, accrued vacation, benefits, and whether the buyer is stepping into the shoes of the current employer under Ontario employment standards.
Protect Your Transaction with Legal Guidance
Reviewing your commercial contracts early prevents eleventh-hour bottlenecks and ensures a smoother, more profitable business transition.
At Houlihan Law, we help local entrepreneurs and business owners navigate corporate and commercial transactions with confidence. If you are planning to buy or sell a business in Sarnia, contact our office today to discuss how we can help protect your interests.
Disclaimer: This blog post is provided for informational purposes only and does not constitute formal legal advice.