What is Commercial Law?
Commercial law, also known as business law, deals with the rights, relations, and conduct of persons and businesses engaged in commerce, merchandising, trade, and sales. Commercial law incorporates legal advice on business interactions and the documents that regulate it.
Frequently Asked Questions
Independent Legal Advice (“ILA”) refers to legal advice given by a lawyer who is not involved in the transaction with the client. ILA is usually required by lenders and other sophisticated parties who want to ensure that their clients are fully informed of the content and consequences of a transaction. ILA should be obtained by any person who is self represented and who is involved in a transaction where all, or some, of the parties are represented by the same lawyer.
A shareholders’ agreement regulates the relationship between shareholders. It is important as without a Shareholders’ Agreement, affairs between shareholders, i.e. the right of first refusal, insurance, share price, etc. is not fixed and may cause disputes.
When you sell your business you want to (a) optimize the price you can demand for the business and (b) the portion of the purchase price you can retain after taxes. To achieve this, you must plan your sale and involve your professional team, (i.e. your lawyer and accountant) at an early stage.
You need to consider the following:
- Is your buyer willing and able?, i.e. does he have the money to pay the purchase price and can he manage the business successfully?
- Can you supply all the documents to allow the purchaser and his team to complete their due diligence?
- Have the parties agreed in principal how the transaction will be structured?
- Will this be a sale of shares or assets?
- It there a Letter of Intent in place?
- Has agreement been reached on your employees?
- When will the transaction close?
- Have you optimized your tax efficiencies?
This is not a comprehensive list of items. Consult our commercial lawyer to discuss your transaction.
Buying and operating a business can be very rewarding. It is an exciting phase in any persons life. This excitement is the root cause of most mistakes and issues during the purchase process. The first thing to remember is that you must make a calculated decision whether to buy the business, or to walk away from the transaction.
Here are a few tips:
- Get involved in businesses that you know something about. Alternatively, ensure that you can be trained to manage the business effectively within a reasonable period
- Research the business’ history
- Have a professional look at the financials
- Do a due diligence
- Speak to the employees, see if they are willing to say on.
- Confirm what you are buying; what is included, and what is not
- Is there a lease or property involved?
- Are the accounts and taxes up to date?
- Speak to the suppliers and key customers
- If you are not happy with the results or certain aspects of the business, walk away
After a decision is made, the legal process is simple:
- Negotiate the terms and sign a Letter of Intent
- Sign a Purchase Agreement
- Decide on a closing date and close the transaction
- Deal with any post-closing issues
It is common cause that doing business is risky; anything can go wrong, some of which have little or nothing to do with the business itself. For this reason, a business owner must take all the steps he/she can to minimize this risk. There are various tried and tested methods to limit these risks; focus on the following areas:
- Limiting personal liability
- Splitting business risk and personal involvement
- Keeping your assets separate from your liabilities and debts
- Limiting risk to areas where risk should be; risk entities
- Using formal structures to utilize statutory protection mechanisms
- Protecting your income through tax structuring and retention strategies
- Demonstrating fiscal and administrative responsibility
- Operating within the confines of the agreed model
When a business implements and utilizes the aforementioned, it optimizes its chances of surviving adverse situations.
Commercial leases regulate the relationship between the landlord and the tenant. If your business is located in a premises (a shop or office), there must be a commercial lease in place. Commercial leasing in British Columbia is further regulated by the Commercial Tenancy Act.