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Frequently asked questions > Company > Acquisition and sale of a business > What conditions should contain the sale contract of a business?

What conditions should contain the sale contract of a business?

In Quebec, besides the usual conditions, such as the representations and warranties of the seller and the obligations of the purchaser, the sale contract can contain a commitment of the seller not to cause damage to the purchaser by his future activities. Thanks to his know-how and his network of contacts, the seller could indeed create immediately a new business which would be in direct competition with the one that he has just sold to the purchaser.

We shall thus provide clauses of non-competition and non-solicitation of clientele and staff. The non-competition clause must describe what activities are prohibited to the seller, on which territory and for how long. The non-solicitation clause, as for it, forbids the seller to approach the clients and employees of the business sold.

To ensure the respect of these commitments, we can match them with a penalty clause providing for a compensation due to the purchaser in the case of contravention by the seller.

The sale contract can also provide a mechanism to ensure the continuity of the activities of the business sold with its clients and suppliers. We can so stipulate that the seller will assure a service of accompaniment during a predetermined period of transition.

The sale of shares will provide the responsibility of the seller for the period preceding the acquisition and a clause of compensation in the event of eventual claims received by the purchaser.

The sale contract of assets should be accompanied by a detailed list of all the property which are sold with the business, but also of all the property which are not included in the sale, such as the bank accounts, as the case may be.

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