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Sale and Purchase of Business Agreement Changes- What You Need to Know

In early September, the ADLS Documents and Precedents Committee published an updated Agreement for Sale and Purchase of a Business. The changes include a new assumption that the business can be zero rated under the GST Act in most cases, as most businesses in these cases are a going concern. Another reason a zero rating would be appropriate is if a CZR applies, which is also very common. If a CZR doesn't apply and the business isn't a going concern, tweaks must be made to ensure the document is accurate before proceeding with execution.

The new document also features a number of other changes, which are highlighted below. Remember, when you're working with business agreements of this calibre or are purchasing or selling a business, it's also a good idea to seek tax and legal advice. You can't always rely solely on a templated form from an agency and even the Committee has added advice about seeking third-party professional assistance with regard to certain clauses in the agreement.

Clause about Using Land as a Principle Residence

The updated agreement states that purchasers won't be using the land as a principle residence. This means that if you plan to live on any portion of the land or business you are buying, you'll need to make changes to the agreement before you sign it. Failure to do so could mean the agreement was signed with an incorrect statement. This is most common with hotel and motel or management rights purchases, where the business owner may take it as a perk to have a residence on the business site.

Highlight of Other Changes

The update to the Agreement for Sale and Purchase of a Business also includes a number of new definitions, addition of language and more detail about certain aspects of the agreement. Here's a list of just some of the things the ADLS has added or changed:

  • A brand new condition regarding due diligence was added to help ensure proper decision making research is performed
  • Additional details about what should be included in any settlement are spelled out
  • The process of assigning leases has been made more clear and detailed
  • Certain sections have been updated to align more fully with the ADLS Agreement for Sale and Purchase of Real Estate to help reduce confusion and increase efficiency
  • A right of pre-settlement inspection was added into the agreement
  • Lease conditions were moved to be located with relevant conditions within the appropriate clause
  • A no-announcements clause was added to the document
  • The overall design of the document has changed, including the font. The ADLS says that it plans to update all its documents to create a streamlined library of templates and forms in the future.

Brokers, regular buyers and sellers, agents and solicitors may want additional information about the changes to the ADLS document. To make things easy, the ADLS has established a version that allows you to compare the old language and formatting to the new document. You can find that document on the ADLS website.


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