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Sale of Business Affidavit (Ontario)

By
Commercial Real Estate Agent with RE/MAX West Realty Inc., Brokerage (Toronto)

Sale of Business Affidavit (Ontario)

 

Documenting Due Diligence

 

In order to complete the paperwork associated with the sale of a business, the Ontario Real Estate Association (OREA) has come up with FORM 503.

 

It is designed to provide a guideline summarizing the step by step procedures to be followed. It was drafted in an effort to ensure that the practitioner would comply with Regulation 567/05 passed under the Real Estate and Business Brokers Act, 2002, particularly s. 21.

 

The document is reproduced below, however, kindly note that there are boxes to check on the original form.

 

Briefly, it deals with

 

  1. Possession of the premises, ownership or lease
  2. The sublet, if any
  3. The liabilities, if any
  4. The books

 

You will also notice that at the end of the document, there is a Waiver. It’s rather short and abrupt. It makes reference to s.21 of Regulation 567/05. Ceratinly, no one would understand the waiver, if it wasn’t explained to them.

 

There should be an “informed consent” Form, as there is with other documents. It is very difficult to ensure that the buyer truly understood and appreciated the significance of having executed this Waiver. Oddly, the waiver is to be signed and executed PRIOR to the delivery of the information set out in the Sale of Business Affidavit.

 

So, ordinarily, one would think that the Waiver should have been a separate Form, signed before the required disclosure.

 

If one were looking for the correct procedure to follow, together with documentation, it should be:

 

  1. delivery of Informed Consent document
  2. execution of Waiver,
  3. delivery of Sale of Business Affidavit,
  4. Acknowledgement of Receipt of Affidavit.

 

This procedure would follow the requirements of the Regulation and better document the appropriate steps in the transaction.

 

The one little problem here, is that the Informed Consent document, doesn’t exist.

 

Here is a sample copy of FORM 503:

 

 

 

Sale of Business

Affidavit

 

Form 503

for use in the Province of Ontario

 

 

 

I,............................................................................................................................... (Print Name)

.

of the...................................................................................... of............................................................................................

(City, Town, Township, etc.) (Name of Municipality)

in the...............................................................................................of……………

(Region, County or District) (Name of County or District)

 

to Wit: Make oath and say:

 

1. I am owner of a business situated at.....................................................................................................................

 

or

 

 I am Director of .................................................................. ...................................................................which owns a business situated at

(Company)

............................................................................................................................

 

 

2. Possession of the premises in which the business is being conducted is held:

by virtue of ownership of the premises;

 

or

 

by virtue of a lease (recite terms of lease or attach copy).........................................................................................................................................................................................................................................................

 

3. The.......................................................................................of the premises in which the business is carried on (Describe Area Sublet) has been sublet to...........................................................................on the following terms:

.................................................................................................................................

 

or

 

No part of the premises in which the business is being carried on has been sublet.

 

4. The liabilities of the business are comprised of current day-to-day accounts payable, a bank loan of $...............................................................,

a mortgage of $................................................................... . and

(list other liabilities)...............................................................................

.................................................................................................................................

 

or

 

There are no liabilities other than current day-to-day accounts and the contingent liability in the lease.

 

5. Such books of account of the business as are in my/the company's possession have been made available to the person wishing to acquire the business;

 

or

 

No books of account will be made available;

 

or

 

There are no books of account of the business.

 

SWORN before me at the........................................................................................................... of............................................................

in the.................................................................of...................................

this..........day of.........,2013...................................................

(Signature)

 

 

Commissioner:........................................................................................

 

 

 

WAIVER:

 

Re:...........................................................................................................................

 

I,.............................................................................................................................., having received and read the statement under oath of the person disposing of the above business, hereby waive compliance with Sub-section (2), Paragraphs 1 and 2, of Section 21 of the General Regulations of the Real Estate and Business Brokers Act RSO, 2002.

 

.............................................................................DATE..........................................

 

(Buyer)

 

.............................................................................DATE..........................................

 

(Buyer)

 

 

 

 

 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com

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