Due diligence is the one phase of a business acquisition where thoroughness always pays dividends. Every hour invested in verifying the seller's representations before close is worth ten hours of post-close dispute resolution, remediation, or legal action. Over 17 years of BC acquisitions, the most damaging surprises — undisclosed CRA arrears, lease clauses that prohibit assignment, key employees planning to leave, customer contracts with change-of-control termination rights — consistently share one characteristic: they were knowable during diligence but nobody looked. This checklist covers all 63 items you should verify before releasing any conditions in a BC business acquisition.
Financial Due Diligence (Items 1–18)
1. Three to five years of federal T2 corporate income tax returns with CRA Notices of Assessment. 2. Three to five years of compiled or reviewed financial statements prepared by an independent CPA. 3. Twelve months of monthly bank statements for all business accounts. 4. GST/HST returns for the past three years and confirmation of no arrears with CRA. 5. Payroll deduction remittance records (T4 summaries) for the past three years. 6. Accounts receivable ageing report as of the most recent month-end. 7. Accounts payable ageing report and list of all outstanding vendor balances. 8. Inventory count and valuation methodology; confirm physical inventory matches recorded balance. 9. List of all capital assets with purchase dates, original costs, and current depreciation schedules. 10. Any outstanding business loans, lines of credit, equipment leases, or mortgage obligations. 11. Credit card statements for the past 12 months to verify owner add-backs and business expenses. 12. Gross margin breakdown by product or service category for the past two years. 13. Customer revenue breakdown — top 20 customers by revenue for each of the last three years. 14. Monthly revenue trend for the last 24 months to identify seasonality and direction. 15. Any outstanding or pending CRA audit, reassessment, or tax dispute. 16. Workers' Compensation Board (WorkSafeBC) clearance letter confirming no outstanding premiums. 17. BC Employment Standards Act compliance: confirm no outstanding wage claims or orders. 18. Confirmation of GST/HST registration number and status.
Legal Due Diligence (Items 19–34)
19. Commercial lease agreement including all schedules, amendments, and option-to-renew provisions. 20. Confirmation from the landlord (not just the seller) that lease assignment is permissible and that they will consent. 21. Remaining lease term and option periods; confirm the business is economically viable for at least the remaining term. 22. Personal guarantees on the lease — confirm which guarantees expire at assignment and which survive. 23. Shareholder agreements, if applicable — confirm no right of first refusal or drag-along provisions that affect the sale. 24. Certificate of Incorporation and all amendments from the BC Registry. 25. BC Registry search confirming no pending dissolution, receivership, or insolvency proceedings. 26. PPSA (Personal Property Security Act) lien search on the business and all registered assets. 27. Provincial Court and Supreme Court of BC searches for any outstanding litigation involving the seller or the business entity. 28. Employment contracts for all key employees — confirm notice periods, non-solicitation and non-compete clauses. 29. Key supplier contracts — confirm assignment provisions and change-of-control clauses. 30. Key customer contracts — confirm assignment and change-of-control provisions; identify any termination rights. 31. All business licences and municipal operating permits — confirm they are current and transferable. 32. Regulatory licences specific to the industry (liquor licence, childcare licence, dental registration, etc.) — confirm transfer process and timeline. 33. Insurance policies — confirm type, coverage amounts, and exclusions; obtain a loss-run report for the past five years. 34. Franchise agreement (if applicable) — confirm transferability, fees, renewal terms, and franchisor approval process.
Operations Due Diligence (Items 35–45)
35. Complete employee list with position titles, employment type (full-time, part-time, contract), compensation, start dates, and accrued vacation balances. 36. Identify key-person dependencies — which employees are critical to daily operations and customer relationships, and assess retention risk. 37. Staff turnover history for the past two years; high turnover is a leading indicator of management problems. 38. Standard operating procedures documentation — does the business operate on documented systems, or does it rely on the owner's knowledge? 39. Technology systems inventory: POS systems, accounting software, CRM, inventory management, website and hosting. 40. Software licence agreements — confirm licences are transferable and subscriptions are current. 41. Major equipment and machinery — review maintenance logs, service records, and assess remaining useful life. 42. Health and safety program compliance (WorkSafeBC registration, WHMIS, equipment inspection certificates). 43. Supplier list with contact information, contract terms, exclusivity provisions, and payment terms. 44. Confirm no supplier has a right of first refusal or termination right triggered by change of ownership. 45. Utilities and service contracts — confirm transfer or assignment procedures for internet, phone, alarm, waste management.
Customer Due Diligence (Items 46–53)
46. Customer list with revenue attribution — identify top 10 customers by annual revenue and their percentage of total revenue. 47. Customer concentration analysis: if any single customer represents more than 15–20% of revenue, request a copy of their contract and assess relationship durability. 48. Customer contract terms: duration, renewal provisions, pricing escalation clauses, and assignment rights. 49. Customer churn rate — how many customers have been lost in the past two years and why? 50. Net Promoter Score or equivalent customer satisfaction data, if available. 51. Online reviews across Google, Yelp, Facebook — review trend over the past 24 months for reputation signals. 52. Any pending customer disputes, complaints lodged with consumer protection bodies, or unresolved refund claims. 53. Understand whether customer relationships are personal to the owner or transferable to a new operator — a distinction that is critical in professional service businesses.
Environmental and Regulatory Due Diligence (Items 54–58)
54. Phase I Environmental Site Assessment (ESA) for any business involving fuel storage, chemicals, manufacturing, dry cleaning, or prior industrial use — this is a lender requirement in most BC acquisition financings. 55. BC Environmental Management Act compliance: confirm no known contamination, no orders from the BC Ministry of Environment, and no ongoing remediation obligations. 56. Contaminated Sites Registry search (BC Ministry of Environment) for the property address. 57. Municipal environmental compliance orders or notices of violation. 58. For food businesses: BC Food Safety Act inspections, most recent health authority inspection reports, and any outstanding orders or conditions on the food premises licence.
IP and Digital Assets Due Diligence (Items 59–63)
59. Trademark registrations — confirm ownership, registration status with the Canadian Intellectual Property Office (CIPO), and renewal dates. Verify that the business name, logo, and any product names are registered. 60. Domain name registration — confirm the domain is registered in the company's name, not the owner's personal name, and confirm the transfer process. 61. Social media account ownership — confirm accounts are registered to business email addresses that will transfer to the new owner, not personal email addresses. 62. Website — confirm transfer of hosting account, CMS credentials, and all third-party integrations (payment processors, booking systems, email marketing platforms). 63. Customer data and email lists — confirm data is stored in a transferable CRM or email platform, and review for CASL (Canada's Anti-Spam Legislation) compliance and any applicable PIPA (BC Personal Information Protection Act) obligations.
Key Takeaways
- Always obtain CRA T2 returns and Notices of Assessment — compiled financials alone are insufficient for verifying reported earnings.
- Lease assignability confirmed directly with the landlord (not just the seller) is one of the most frequently overlooked items and can kill a deal at close.
- PPSA lien searches are mandatory in asset purchases — undisclosed secured creditors can follow assets.
- Customer concentration above 20% in a single client should trigger deeper contract review and a discounted valuation.
- Environmental diligence is a lender requirement for any business with industrial, fuel, or chemical exposure in BC.
- Social media and domain name ownership in the business's name, not the owner's personal accounts, is critical for digital-first businesses.
Written by Ali Sedighi
Ali Sedighi is a business acquisition consultant based in Vancouver, BC, with 17+ years of experience guiding buyers through acquisitions across British Columbia and Canada. He founded BizBuy.ca to provide buyers with the same level of dedicated representation that sellers receive from their brokers — ensuring every acquisition decision is made with full information and professional advocacy.