On September 12, 2013, in Payette v. Guay inc.1, the
Supreme Court of Canada rendered a decision which will be of
interest to anyone involved in a transaction for the purchase or
sale of assets. The Court shed some light on the interpretation of
clauses restricting employment and post-employment competition
which are contained in an agreement providing for the sale of
assets but which, incidentally, includes an employment
Following a detailed analysis of the wording of the asset sale
agreement and the circumstances surrounding its negotiation, the
Supreme Court confirms that the clauses in dispute are not related
to an employment contract but rather to a sale agreement. According
to the Court, the essence of the principal obligations set out in
the primary contract do not relate to an employment relationship
insofar as such a relationship is merely incidental to the sale
But that is not all: Justice Wagner, writing for the Court,
confirms that in order for a non-solicitation
clause negotiated as part as an asset sale agreement to be
valid, it does not need to be limited in its territorial
Here are his reasons:
The object of a non-solicitation clause is narrower than that
of a non-competition clause.
The non-solicitation clause creates obligations which are less
restrictive than those created by a non-competition clause.
While not specified, the territorial scope of the clause can
easily be circumscribed by conducting an analysis of the target
The modern economy and new technologies no longer allow for the
geographic limitation of a customer base.
Accordingly, a non-solicitation clause contained in an asset
sale agreement cannot be automatically invalidated due to the
absence of a territorial limitation.
This decision will be assessed further in an upcoming
1 2013 S.C.R. 45.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
While most are well aware that the sale of a business is generally a complex process, even sophisticated business owners are surprised by just how much cost and effort is required to complete the sale.
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