When the time comes to sell a business, one thinks of the price, financing, and finding a buyer. The notary sometimes enters the conversation at the very end: "There will just be papers to sign."

Yet, certain problems would be better resolved well before this meeting. A building might belong personally to the seller rather than to their company. A mortgage must be discharged. The bank might ask for a guarantee that does not match what the buyer and seller had planned. This type of detail can delay a transaction, even when everyone agrees on the price.

In Quebec, a notary can participate in several stages of a business transfer. Their role depends on their expertise, the mandate they are entrusted with, and what is being sold. Some deeds require their intervention; for others, they can act as a legal advisor alongside the professionals already on the file.

Executive summary: a notary can assist you with the legal preparation for buying or selling a business, review the real estate aspects, and prepare certain financing or security documents. They are not mandatory for all transactions. Their intervention is, however, required to create a real estate mortgage. Consulting them early allows you to know which deeds to prepare and what verifications to schedule before signing.

Is a notary mandatory to sell a business?

Not in every case. It all depends on the transaction.

The sale of company shares does not have to be notarized simply because it is a business transfer. However, if the financing requires a new mortgage on a property, it must be created by a notarized deed in minute form. This requirement is provided for in Article 2693 of the Civil Code of Quebec. Consult Article 2693.

The right question to ask is therefore: "In our transaction, which deeds require a notary and what other services do we wish to entrust to them?"

A notary who practices business law can intervene more broadly than one mandated solely for a mortgage or real estate. This scope must be agreed upon from the start.

Start by understanding what is being sold

Saying "I am selling my business" seems clear. In the documents, however, one must be much more precise.

Is the buyer acquiring the company's shares? The equipment, inventory, and trade name? Is the building included? Is the seller retaining certain assets?

The notary can help examine these questions and prepare the purchase offer, depending on their mandate. The Chambre des notaires recognizes their role in analyzing the purchase of assets or shares and financing options. Chambre des notaires du Québec — Buying an existing business.

If you are selling shares

The buyer becomes a shareholder of the company. The company generally continues to hold its assets and remains responsible for its obligations.

The company's documents then take on significant importance during due diligence: the register of shareholders, the shareholders' agreement, resolutions, and transfer restrictions, among others. The minute book is used to record decisions and changes affecting shareholders and directors, in particular. Chambre des notaires du Québec — Business documents.

If you are selling assets

A clear list must be drawn up of what is changing hands and what is staying with the seller.

Take a garage owner who wishes to keep their tow truck and certain personal tools. It is better to clarify this during discussions than to discover, just a few days before the sale, that the buyer thought they were included.

The same attention is required for inventory, accounts receivable, contracts, the trade name, and rights related to the premises. Each element must be treated according to its nature.

A good starting point: ask for a short written description of the transaction. Who is selling what to whom, for what amount, and on what conditions? This page will help the advisors work from the same agreement.

Prepare the documents while there is still time to discuss

Legal work often begins before the final agreement. As soon as an offer or a letter of intent is on the table, certain decisions deserve to be examined.

Depending on the mandate, the notary can prepare or review various documents related to the purchase, the company, the real estate, or the financing. The important thing is to know who is handling each part of the file.

For example, the seller and buyer may have agreed to monthly repayments for a vendor take-back. If the bank's documents impose restrictions on these payments, the issue must be resolved before signing.

Therefore, transmit drafts as you go. Indicate what has been accepted, what remains to be negotiated, and what concerns you.

You can ask very simple questions:

• Does this document correctly state what we agreed upon?

• Does it commit me to something we didn't discuss?

• What must happen before the transaction can close?

You do not need to master legal vocabulary to ask for a clear explanation. If a clause remains difficult to understand, have it explained with an example taken from your transaction.

When the building is part of the story

In an SME, the business and the building are sometimes perceived as a whole. Legally, they may belong to different people.

The land and the building may be held personally by the owner, by the operating company, or by another company. This must be verified before determining how to structure the sale.

The buyer is also buying the building

The real estate mandate may include a title search, preparation of deeds, and the formalities required for their registration.

The Land Register is particularly useful for identifying mortgages and servitudes affecting a property. However, reading the index is not always enough to understand the scope of registered rights or to confirm the validity of titles. Government of Quebec — Property history.

Depending on the file, it will also be necessary to examine the location certificate, leases, permitted uses, and the lender's requirements. The notary can perform the legal verifications provided for in their mandate; building inspections and environmental assessments are the responsibility of the appropriate specialists. Chambre des notaires du Québec — Verifications before a real estate purchase.

The buyer is acquiring the shares of the company that owns the building

In this case, the building remains the property of the company. It is its shareholders who change.

It is still necessary to examine the real estate aspect and determine whether financing contracts or other agreements contain conditions related to the change of control.

The seller is keeping the building

This situation deserves equal attention. The buyer will need to know under what conditions they can continue to operate the business there.

The lease should be discussed at the same time as the sale: rent, duration, renewal, maintenance, repairs, and permitted work.

Imagine buying a manufacturing company, only to discover that the lease does not give you enough time to make your investments profitable. Occupancy conditions are among the decisions to be settled before closing.

Connecting the loan and the guarantees

A bank may have agreed to finance the purchase before everything is ready to disburse the funds. Sometimes there are still documents to sign, guarantees to constitute, and conditions to fulfill.

Ask the lender to transmit their requirements to the relevant professionals as soon as they are available.

If a real estate mortgage is necessary

The creation of a new real estate mortgage requires a notarized deed in minute form. This does not mean the entire business sale must be notarized: the requirement applies to this specific act. Civil Code of Quebec, Article 2693.

If the guarantee relates to equipment or other movable property

Other formalities apply. The Register of Personal and Movable Real Rights, generally known as the RDPRM, is used in particular to register movable hypothecs. The professional in charge must determine the searches and registrations necessary based on the security selected. RDPRM — Rights registered in the register.

If the seller is financing part of the price

A vendor take-back must be coordinated with bank financing.

Beyond the amount and the rate, one must discuss guarantees, the seller's rank, and any restrictions the bank might impose on repayments.

To understand this mechanism, consult our article on vendor take-backs.

To remember: do not consider the financing complete until the disbursement conditions and required documents are confirmed.

Knowing what role the notary plays in your file

The notary can act as a legal advisor. When they receive a notarized deed, they also act as a public officer and must remain impartial toward the parties to that deed.

In a legal advisory mandate, they may represent only one client. You must therefore understand the function they are performing in your transaction. Chambre des notaires du Québec — Role of the notary.

Clarify, in particular, who their client is, what documents they are preparing, and what verifications are included.

If their mandate covers only the building and the mortgage, do not assume they are also examining client contracts, employment terms, or business permits.

This discussion also helps determine the topics on which each party should obtain separate advice.

Avoiding everyone working in a vacuum

A transaction may bring together a notary, lawyers, a CPA, a tax specialist, and a lender. Each may do good work in their field while waiting for information that no one has provided them.

To keep the file moving, prepare a common list of steps to be completed.

Follow-up does not necessarily end at the signing. For example, when a mortgage debt must be repaid, the discharge procedures must also be organized. Loan repayment and mortgage discharge are two distinct elements of the file. Chambre des notaires du Québec — Procedures related to discharge.

Designate one person to keep the list up to date. They must be able to state what is finished, what is missing, and who needs to act.

An example: selling a distribution business with its warehouse

Let’s take a fictional case. An owner is selling her distribution business and warehouse for a total of $2 million. The buyer provides a down payment, obtains a bank loan, and asks the seller to finance part of the price.

During the discussions, the advisors note that the equipment belongs to the operating company, but the warehouse is owned by another company belonging to the seller.

One must then organize both parts: specify what each company is selling, agree on the price distribution, and coordinate the documents with the financing.

The notary in charge of the real estate examines the titles and prepares the deeds provided for in their mandate, including the new real estate mortgage. The other advisors handle the commercial, accounting, and tax elements entrusted to them.

If the lender asks for an additional document or if a difficulty arises in the titles, the entire team must know quickly. This is what allows for schedule adjustments before the buyer and seller show up to sign.

What to prepare before the first meeting?

You do not need to have a perfect file to consult. Bring the available documents and make a list of what is missing.

The following elements can help:

• a summary of the proposed transaction;

• the names of the persons and companies involved;

• the purchase offer or letter of intent, if there is one;

• the list of assets included and excluded;

• company documents and the shareholders' agreement;

• real estate documents and relevant leases;

• financing offers and information on debts;

• the conditions envisioned for the vendor take-back;

• the desired closing date;

• the contact information for other advisors.

Then ask for a written mandate. It should specify the work included, exclusions, fees, disbursements, and estimated timelines.

Errors that complicate the file

Calling a few days before signing. Certain verifications take time. A missing authorization or a title problem cannot always be resolved in a day.

Assuming the building belongs to the company. Verify the legal owner before structuring the transaction.

Believing the notary handles everything. Their mandate must specify the responsibilities they assume and those that fall to other professionals.

Wait to forward the bank's requirements. The guarantees and disbursement conditions must be coordinated with the purchase agreement.

Forget post-sale procedures. Publications, cancellations, and updates must have someone in charge, even after signatures are finalized.

Frequently asked questions

Is a notary mandatory for selling a business in Quebec?

Not for every transaction. It depends on the planned deeds. For instance, the creation of a real estate mortgage requires a notarized deed in minute form.

Can a notary handle a share sale?

Yes, depending on their expertise in business law and the mandate entrusted to them. Ask them which documents and verifications they will manage.

What is the difference between a notary and a lawyer?

Both can advise parties in a business transaction. A notary also holds the status of public officer to receive notarized deeds. Their roles can be complementary depending on the needs of the file.

If real estate is included, must the entire sale be notarized?

No. You must distinguish between the direct purchase of the property, the purchase of the shares of the company that owns it, and the creation of a real estate mortgage. Requirements differ for each operation.

How much should be set aside for legal fees?

The cost depends on the mandate and the complexity of the file. Request an estimate that distinguishes between fees, disbursements, and taxes. The Chambre des notaires does not impose mandatory rates. Chambre des notaires du Québec — Legal Fees.

At what point should you consult a professional?

As soon as the project becomes concrete enough to discuss its structure, ideally before making significant commitments. An initial meeting allows you to determine what needs to be verified and to establish a realistic schedule.

To prepare for other stages, consult the ultimate guide to selling a business.

This article provides general information and does not constitute legal, tax, or financial advice. Have the structure, deeds, and formalities of your business transfer validated by professionals appropriate to your situation.