The recent attention surrounding cyber security is a reminder of
how a company's records are no longer stored in boxes filled
with paper files. Although the (not so) new age of electronic data
storage has resulted in new ways of doing business that were never
before possible, it has also resulted in a host of complexities
when considering how, and in some cases what, electronic
records will be handed over to the buyer of a business in an
M&A transaction. These complexities are compounded when a buyer
is only purchasing a portion of a business, the rest of which will
be maintained by the seller or sold to a different party.
For lawyers drafting and negotiating
a purchase agreement, this goes beyond describing the assets to be
sold in a way that includes electronic records; it also involves
re-thinking conventional books and records provisions and
considering their applicability in the digital age. In addition, it
means working closely with those who understand the selling
company's policies and methods around the storage and retention
of electronic records, and together considering the following:
What do the company's records consist of? Are they a mix of
paper files and electronic records?
Where are the electronic records located? For example, are they
housed on an internal server or through a third-party service
provider, or a mix of both?
What volume of records are stored electronically? Unlike the
age of boxes filled with paper files, electronic records have a
greater propensity to "pile up." Consider whether the
volume of electronic records can realistically be transferred to a
buyer without incurring significant costs.
Are all of the electronic records relevant to the buyer's
continued operation of the business to be purchased?
Does the buyer have the infrastructure to receive and store all
of the electronic data proposed to be transferred?
In the case of a partial sale, can the data realistically be
split-up without incurring significant costs? If so, what will that
process look like?
Who will be responsible for transferring and receiving the
electronic records? What will that process look like? How much lead
time is required?
Working through the above questions with technology
professionals at each of the selling company and the buyer is a
critical exercise in understanding the effort and costs associated
with the transfer of electronic data. Deciding at the outset which
party will be responsible for the costs associated with
transferring the data can prevent disagreement later on. Asking the
buyer to consider its own capacity to receive the data may be
important in determining the universe of electronic records to be
Given the prevalence of electronic data storage in today's
digital age, these considerations are likely relevant — at
least to some degree — to all types of businesses, but will
certainly be of particular importance when the selling company has
a large volume of electronic records.
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.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan 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.
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