There are two primary ways to sell or purchase a corporate business. One is a share sale or purchase, the other is an asset sale or purchase (which applies to any business structure). In a share purchase or sale, the employment law implications are usually minimal as the actual employer-employee relationship generally stays the same. This is true unless the new shareholders make drastic changes to the purchased business structure. However, in these circumstances, the purchasers of shares ought to conduct comprehensive due diligence on the future financial stability of the company they are buying. This includes a thorough assessment of all employment contracts and/or share purchase agreements in place with those the company employs or contracts with.
In an asset sale or purchase, the employment law implications can be quite significant. Of course, due diligence is also required to be conducted in asset sales. However, in asset sales and purchases, the new owners often make substantial changes to the business structure or shut the business down entirely. If a business is shutdown or significantly downsized after a sale, litigation often ensues because employees are required to be compensated upon their termination.
Therefore, employment counsel is important throughout the life cycle of a business. In contemplation of major business changes – which are common in the life of a corporation or any business structure – employment counsel can draft employment contracts or other agreements to help mitigate the corporation’s future liability. Furthermore, once someone is ready to buy or sell a business, employment counsel can help mitigate legal consequences further by helping to arrange the sale in a manner that complies with all relevant employment laws. For example, the employment law implications of selling a business inclusive of an actual building may be far different than selling a business without such a building.
Mann Lawyers is a trusted member of the Ottawa business community and has an expansive business law practice. In the event of a sale of a business the employment group will often be invited to collaborate with the business law group on the transaction in order to address employment issues related to the transaction.
Additionally, if someone is in the beginning stages of expanding their business and starting to contemplate hiring staff, our employment lawyers can be a great resource to protect a business’s long-term interests.