Odette Project for Technology, Innovation and Commercialization OPTIC Mergers and Acquisitions Semin

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Odette Project for Technology, Innovation and
Commercialization (OPTIC)Mergers and
Acquisitions SeminarJune 20, 2009M A Legal
Issues

• William J. Willis
• McTague Law Firm LLP
• 455 Pelissier Street
• Windsor, Ontario N9A 6Z9
• Telephone [phone]
• Facsimile 519-255-4360
• E-mail wwillis_at_mctaguelaw.com

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INTRODUCTION

• Mergers and acquisitions of private companies in
  Ontario are subject to a wide array of legal
  requirements
• Consideration must be given to
• corporate law
• securities law
• tax law
• labour and employment laws
• anti-competition (sometimes called anti-trust)
  laws
• foreign investment laws
• environmental laws and
• privacy laws.

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OUTLINE

• Part I common methods of acquiring a private
  company in Ontario
• Part II key legal considerations
• Part III purchasing assets vs. contingent
  liabilities

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COMMON METHODS OF ACQUIRING A PRIVATE COMPANY IN
ONTARIO

• asset purchase transactions
• share purchase transactions

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KEY LEGAL CONSIDERATIONS

• asset purchase transactions
• commonly excluded assets
• cash and other similar assets
• term or time deposits
• cash on hand or on deposit
• GICs, treasury bills and other similar cash items
• marketable securities
• non-arms length agreements
• contracts with non-arms length parties
• key man insurance
• other
• insurance policies including any claims
• tax refunds and/or credits
• corporate and tax records
• licences

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KEY LEGAL CONSIDERATIONSContinued

• commonly purchased assets
• inventory
• land and building
• machinery and other depreciable property
• accounts receivable
• intellectual property
• goodwill

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KEY LEGAL CONSIDERATIONSContinued

• commonly assumed liabilities
• accounts payable
• unfilled sales orders
• indebtedness for borrowed money
• warranty claims
• third party contracts

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KEY LEGAL CONSIDERATIONSContinued

• share purchase transactions
• share purchase agreements
• purchase and sale provisions
• purchase price
• mechanics
• representations and warranties
• closing conditions
• basic legal provisions

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PURCHASING ASSETS vs. CONTINGENT LIABILITIES

• asset purchase transaction or share purchase
  transaction?
• parties free to choose
• generally vendors prefer to sell shares whereas
  purchasers prefer to buy assets

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PURCHASING ASSETS vs. CONTINGENT
LIABILITIESContinued

• corporate law considerations
• purchasing assets vs. contingent liabilities
• bulk sales act
• employees
• pension and benefit plans
• third party consnets
• corporate structure
• simplicity
• tax considerations
• vendors preference share sale
• purchasers preference asset sale

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PURCHASING ASSETS vs. CONTINGENT
LIABILITIESContinued

• changing preferences
• vendor may prefer an asset sale
• availability of losses
• low tax rate
• tax cost of assets exceed purchase price of
  shares
• sale of division
• Purchaser may prefer a share purchase
• availability of losses
• fair market value less than tax cost
• other taxes
• land transfer tax
• PST
• GST
• HST

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Odette Project for Technology, Innovation and
Commercialization (OPTIC)Mergers and
Acquisitions SeminarJune 20, 2009M A Legal
IssuesPresented by William J. Willis