The acquisition or sale of a fish and game outfitting business
can be a complex affair involving overlapping financial, legal and
tax issues for both the seller and the purchaser. In such matters
it is essential to seek the advice of professionals able to guide
you throughout the process.
Sale of assets or sale of shares: how to decide?
The structure of the transaction must be negotiated by the
parties after analyzing its commercial and tax implications. The
negotiation process can prove long and tedious, since what is to
one party's benefit is generally to the other's
To the extent that the seller operates the outfitting business
through a corporation with share capital, it may well wish to
dispose of all of the issued and outstanding shares of the
operating corporation. Such a transaction is often less complicated
to conclude, as there is no change in ownership of the assets of
the operating corporation. However, the purchaser thereby
"inherits", so to speak, all of the corporation's
"baggage", including its liabilities and contingencies,
which could lead to nasty surprises for an unwary purchaser. If the
shares qualify as "small business corporation shares" the
seller may be entitled to a capital gains exemption. This can
represent a considerable benefit for the seller, as sale proceeds
of up to $824,176 (for the 2016 taxation year) may be received tax
Often, however, the purchaser will prefer to acquire only the
assets necessary for the operation of the business. A transaction
of this kind will allow it to acquire either a portion or all of
the assets of the operating corporation (equipment, real estate,
goodwill, etc.) without assuming the corporation's liabilities,
known or unknown. The purchaser will thus have no exposure to legal
claims that third parties may have against the vendor corporation.
From a tax standpoint, an asset purchase will allow the purchaser
to increase the tax base of the assets for depreciation purposes.
If this type of transaction is opted for, the parties will have to
agree on the allocation of the purchase price to the various assets
being acquired. The acquirer will generally want to allocate the
purchase price to inventory or depreciable property (buildings,
equipment, etc.) to the greatest extent possible, in order to
reduce the taxable revenues that the business will generate in
How the transaction is structured will also have an impact on
the nature and scope of the purchaser's due diligence. For the
purchaser, the purpose of this exercise is essentially to reduce
the risks inherent in acquiring the business. The results of the
due diligence can influence both the purchase price and the terms
and conditions of the purchase & sale agreement prepared by the
parties' legal counsel.
The lease from the provincial government – another factor
to take into consideration
Most fish and game outfitting businesses are operated pursuant
to a lease issued by the Ministry of Natural Resources and
Wildlife, giving the business exclusive hunting, fishing and
trapping rights on the leased territory. Such leases, which usually
have a nine-year term, impose several obligations on the outfitter.
In addition to the obligation to maintain its status as a licensed
outfitter, the outfitter must draw up a management plan every three
years that covers wildlife conservation and harvesting.
Under the lease, the Ministry must be notified in advance of any
assignment or sublease, and its prior consent is required before
the lease can be transferred. If consent is not obtained and the
lease is transferred nonetheless, the business faces the
possibility of administrative or legal action on the part of the
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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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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