Letter Of Intent To Sell Business for Canada

Letter Of Intent To Sell Business Template for Canada

A Letter of Intent to Sell Business is a preliminary written agreement under Canadian law that outlines the proposed terms and conditions for the sale of a business. While primarily non-binding, it serves as a framework for negotiating the definitive agreement and typically includes binding provisions for confidentiality and exclusivity. The document addresses key elements such as purchase price, payment terms, transaction structure, due diligence requirements, and timeline, while operating within the Canadian legal framework including federal and provincial regulations governing business transactions.

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What is a Letter Of Intent To Sell Business?

A Letter of Intent to Sell Business is a crucial preliminary document used in Canadian business transactions when a business owner intends to sell their enterprise to a potential buyer. It serves as a roadmap for the transaction, documenting the parties' serious intention to proceed with the sale while allowing flexibility for detailed negotiations. The document typically combines non-binding commercial terms with binding confidentiality and exclusivity provisions, operating within the framework of Canadian federal and provincial laws. It is used after initial discussions but before detailed due diligence and definitive agreements, helping to align parties' expectations and outline key transaction terms including price range, structure, timeline, and conditions. This document is particularly important in Canadian business practice as it helps ensure compliance with relevant regulations while providing a clear framework for moving forward with the transaction.

What sections should be included in a Letter Of Intent To Sell Business?

1. Date and Parties: Identification of the seller and potential buyer, including full legal names and addresses

2. Background/Introduction: Brief description of the business being sold and the parties' intention to enter into negotiations for the sale

3. Purchase Price and Payment Terms: Proposed purchase price range or specific amount, payment structure, and any earnout considerations

4. Transaction Structure: Whether the sale will be structured as an asset sale or share sale

5. Due Diligence: Outline of the due diligence process, timeline, and access to information

6. Confidentiality: Binding provisions regarding the confidential treatment of information exchanged

7. Exclusivity Period: Binding provision specifying the period during which the seller cannot negotiate with other potential buyers

8. Timeline: Key dates and milestones for due diligence, definitive agreement, and closing

9. Non-Binding Nature: Clear statement that the LOI is non-binding except for specified provisions

10. Governing Law: Specification that the LOI is governed by Canadian law

11. Signatures: Execution blocks for all parties

What sections are optional to include in a Letter Of Intent To Sell Business?

1. Key Employee Arrangements: Used when retention of specific employees is crucial to the transaction

2. Regulatory Approvals: Include when the transaction may require competition law or other regulatory approvals

3. Break Fee: Used in larger transactions to specify fees if either party terminates negotiations

4. Deposit: Include when a good faith deposit is required

5. Financing Contingency: Used when buyer's obligation to proceed is contingent on obtaining financing

6. Asset/Liability Allocation: Include in asset sales to broadly outline what is included/excluded

7. Post-Closing Covenants: Used when seller's non-compete or transition assistance is crucial

8. Environmental Matters: Include for businesses with significant environmental considerations

9. Broker/Finder Fees: Include when intermediaries are involved in the transaction

What schedules should be included in a Letter Of Intent To Sell Business?

1. Business Description: Detailed description of the business operations, assets, and structure

2. Key Assets: High-level list of major assets included in the sale

3. Excluded Assets/Liabilities: Preliminary list of assets/liabilities that will be excluded from the transaction

4. Key Financial Metrics: Summary of important financial information that forms basis of purchase price

5. Due Diligence Requirements: List of key documents and information required for due diligence

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Genie AI

Cost

Free to use
Relevant Industries

Manufacturing

Retail

Technology

Professional Services

Healthcare

Hospitality

Construction

Real Estate

Financial Services

Transportation

Agriculture

Energy

Mining

Entertainment

Education

Telecommunications

Relevant Teams

Legal

Finance

Corporate Development

Mergers & Acquisitions

Executive Leadership

Business Development

Corporate Secretary Office

Strategy

Tax

Compliance

Due Diligence

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Business Owner

Managing Director

Corporate Lawyer

Business Development Manager

Mergers & Acquisitions Director

Investment Banker

Business Broker

Corporate Secretary

General Counsel

Finance Director

Board Member

Private Equity Manager

Business Unit Head

Chief Operating Officer

Chief Legal Officer

Transaction Advisory Partner

Industries
Contract Law (Common Law): Fundamental principles of contract formation, enforceability, and interpretation under Canadian common law, particularly regarding which elements of the LOI are binding versus non-binding
Competition Act: Federal legislation governing merger notifications and competition review for business sales that meet certain thresholds, which may need to be referenced in the LOI
Investment Canada Act: Federal law governing foreign investment review and approval requirements, relevant if the potential buyer is a foreign entity
Provincial Business Corporations Act: Provincial legislation governing corporate transactions and required approvals for sale of business assets or shares
Securities Act (Provincial): If the business involves public companies or securities, provincial securities regulations must be considered for disclosure and compliance requirements
Personal Information Protection and Electronic Documents Act (PIPEDA): Federal privacy law relevant for handling customer and employee data during due diligence and business transfer
Employment Standards Act (Provincial): Provincial employment laws regarding employee rights and obligations during business transfers
Bulk Sales Act (Where Applicable): Provincial legislation protecting creditors in business asset sales, though repealed in some provinces but still relevant in others
Income Tax Act: Federal tax legislation governing tax implications and structuring of business sales
Excise Tax Act: Federal legislation covering GST/HST implications in business sales and asset transfers
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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