redactedA routine share purchase. Vendor selling, buyer buying, nothing exotic. We pull the target company's tax records during due diligence. Clean. Then we ask to check the vendor's personal tax accounts too. The vendor's lawyer says no. Flat out. Her reasoning: the vendor's personal taxes have nothing to do with the company being sold. Sounds reasonable. It's not. Where it could have gone wrong If the vendor has unpaid tax liabilities, the Canada Revenue Agency has real collection tools it can use, and depending on the circumstances that enforcement activity can affect a transaction in very practical ways. For example: • A requirement to pay could redirect sale proceeds straight to the CRA instead of into the vendor's pocket. • A registered lien or charge could complicate title and slow everything down. • A seizure could impair the vendor's ability to deliver the shares at all. • Even the threat of enforcement can create enough uncertainty to derail a closing that was otherwise ready to go. None of that shows up by asking about the company. It only shows up if you ask about the person selling it to you. How to protect your deal Confirm the vendor, personally, is current with the CRA before closing, or at minimum confirm there's no active or threatened enforcement action that could reach into the transaction. Access to the vendor’s own CRA account information, provided with the vendor’s written authorization, can be enough to give the buyer comfort that there is no unexpected personal tax issue sitting behind the condition. If the Vendor refuses access, it is suitable to obtain Screenshots which are then reviewed by and approved by your accountant.Five minutes of work that can save everyone from a very expensive surprise. Moral of the story: when someone says a piece of due diligence “has nothing to do with the deal,” carefully consider whether that is in fact true. Sources: 1. Canada Revenue Agency. Information Circular IC82-6R13, Clearance Certificate. redacted 2. Canada Revenue Agency. Disposing of or acquiring certain Canadian property (section 116 certificate of compliance). redacted 3. Canada Revenue Agency. Garnishing your income and accounts, Debt collection at the CRA. redacted Disclaimer This article is general information only, current as of the date of publication. It is not legal, tax, accounting or investment advice, and reading it does not create an advisory or client relationship. Consult your own lawyer, accountant and other qualified advisors before acting on anything here. redacted