by kathyras@rogers.com | Aug 6, 2015 | Business Law
Preliminary Considerations
Acquiring a privately held business in Ontario can be accomplished through an asset or share transaction, depending on both tax and non-tax considerations. Generally speaking, purchasers prefer to buy assets and a vendor prefers to sell shares. This varies depending on the circumstances of the transaction and the bargaining power of each party.
Asset Transaction
An asset transaction allows the purchaser to select only those assets and liabilities that it wants to acquire. The remaining liabilities, unless they are expressly assumed, remain the responsibility of the vendor. This allows for flexibility and since liability is fixed, there is no uncertainty to the purchaser as to the nature and extent of the liabilities they will inherit. There are of course, certain exceptions as to the liabilities the purchaser has to undertake e.g. collective agreements of unionized employees.
Purchaser’s preference
A purchaser wants to minimize the purchase price and maximize tax deductions from the assets in future years. A purchaser will often prefer to structure the transaction as an asset purchase and take the tax deductions against income in future years i.e. through a capital cost allowance on depreciable assets; cost of inventory. In comparison to a share transaction, shares are non-depreciable property, there is no tax relief associated with the cost of the shares.
Share Transaction
A share deal involves acquiring the corporation itself, with all of the underlying assets and its liabilities. Ownership of the corporation’s shares result in direct ownership of all of the corporation’s assets and undertakings, whether known or unknown. Therefore, the purchaser must complete due diligence searches and obtain representations and warranties from the owners of the corporation’s shares to safeguard against potential claims in the future. It is common for the parties to negotiate indemnity agreements, where the vendor will agree to pay for any unforeseen liabilities that may arise after the sale for a specified duration of time.
Vendor’s preference
A vendor is usually concerned about the immediate income tax consequences in the year of sale and prefers a share sale as capital gains are taxed more favourably. There are conditions that must be satisfied at the time the shareholder sells his or her shares and throughout the preceding 24-month period that a corporation must satisfy to qualify for the tax deduction.
Additionally, when the shareholder sells shares in a company, the proceeds are paid directly to the shareholder and are only taxed at the shareholder level. This is in comparison to an asset sale where there are two levels of taxation.
These are only basic considerations and may not apply to every situation. Apart from negotiating the purchase price, employment issues and indemnities; structuring the sale or purchase of a business depends on numerous factors.
Purchasing a Business in Ontario
Author: Laura Chiu, Reilly and Partners. Laura joined Reilly & Partners Professional Corporation as an associate after her call to the bar in 2013. Prior to this, Laura gained experience as a summer and articling student in the areas of real estate, administrative law, commercial and civil litigation, and estates and trusts.
by kathyras@rogers.com | Feb 24, 2014 | Family Law
Reilly and Partners Family Law
If you are currently going through a family law dispute, you already know how difficult it can be to keep your emotions in check. You may be having a hard time making decisions or reaching acceptable resolution of matters with your former spouse or common law partner.
Family Lawyers Help You Work Towards Resolution
At Reilly & Partners our family law lawyers understand what you’re going through and want to reassure you that having such complex feelings when going through a separation or divorce is completely normal. After all, the decisions you make now will change your life for many years to come. For this reason, our goal is to offer you the advice of experienced and compassionate family law lawyers who will help you reach peaceful and practical resolution of your family law dispute. The lawyers of Reilly & Partners can help you with family law matters such as:
- Divorce
- Separation
- Cohabitation or Prenuptial Agreements
- Child custody/access
- Spousal support
- Property distribution
- Child Support
Reilly and Partners Ajax, Family Law Lawyers Are Ready to Help
Getting a family law lawyer from our firm involved in your situation doesn’t mean that you want to start or continue a conflict; it simply means that you’re ready to work toward a resolution so that you can move forward with your life. If you’re ready to put conflict behind you in favour of a fresh start, contact Reilly & Partners to see how our family law lawyers can help.
There is usually a significant delay from the time two people decide to separate and the granting of a divorce judgment. In the interim, there are many issues which must be addressed including property division, child and spousal support, custody and access, and possession of the matrimonial home. Where one or more of these issues exist, it is preferable to negotiate at least a temporary and, if possible, a permanent solution. The terms of any agreement reached by the parties is often incorporated into a separation agreement.
Spousal and Child Support
Whether spousal support is appropriate and, if so, how much depends on a number of factors including the length of the marriage, the income and income potential of both spouses and the assets each will have after the matrimonial property has been divided.
Child support is governed by the Child Support Guidelines. The amount of support is determined by using the support payer’s income to the “table amount” of support. This is the basic monthly payment set out in the Guideline tables which is based on the payer’s income and the number of children for whom support is payable.
In addition to table support, there are provisions in the Guidelines for additional support payments or “add-ons”. These include medical expenses, post-secondary education expenses, extraordinary extracurricular activities and daycare expenses.
One of the most difficult issues to consider when a marriage ends is who will have custody of the children. Although most separating spouses put the best interests of the child first and resolve this issue without acrimony, sadly this is not always the case. If there are no abuse issues, it may be helpful to consider mediation to help resolve custody and access disputes. Reilly & Partners does offer mediation services.
A separation agreement is a contract or agreement which is often entered into by separating spouses. It is not necessary to enter into such a contract in order to be considered legally separated, however, this type of agreement is very useful.
Pre-nuptial Agreements and Marriage Contracts
Issues which are dealt with in a pre-nuptial agreement typically include division of assets, spousal support, and the financial contribution of the spouses to the household. Pre-nuptial agreements are particularly useful in addressing perceived inequities in the Ontario Family Law Act, which governs property division on marriage breakdown in the absence of a pre-nuptial agreement or marriage contract. One such potential inequity is how the matrimonial home is treated (see Property Division). A marriage contract is essentially a pre-nuptial agreement that is entered into after marriage
In the absence of a pre-nuptial agreement or marriage contract, division of marital property is governed by the Ontario Family Law Act. Section 5 of the Act provides that each spouse calculates the net value of assets less debts on the date of marriage and on the date of separation. Each spouse then calculates the amount by which his or her assets increased or decreased over the course of the marriage and any difference is equalized. In other words, the spouses share what has been accumulated during the marriage. This formula is subject to certain exceptions such as inheritances and gifts from third parties. The most important exception involves the matrimonial home the value of which may not be deducted as being owned on the date of marriage. It is this exception which provides the most incentive for having a pre-nuptial agreement or marriage contract.
