Indemnification In Your Purchase and Sale Agreement. Canada 150 Recommendation #90

Wednesday’s= Succession

The purchase and sale agreement for the sale of your business will be a lengthy document full of legal words. One of the areas where you should pay particular attention is in the area called indemnification.

Indemnification is when you end up paying the buyer some money at a time later than the sale date.

Indemnification is what will happen if after you sell your business, the buyer comes back to you and says that something has happened that cost them money and you did not tell them about it. The most common of these situations is when the business has a tax audit after you sell and there is money owing.

The indemnification part of your purchase and sale agreement will talk about how you need to pay the buyer the tax that is owing for the years of the audit where you were the shareholder.

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