When a business owner dies in BC, the executor often has to keep the business going and then sell it. This guide covers the executor's authority, selling before or after probate, the 210-day distribution rule, valuation and tax, and how the sale itself works.
A business does not pause when its owner dies. Staff still need to be paid, customers still expect service, and the value of the business can fall quickly if nobody is in charge. Often it falls to the executor to hold things together and then find a buyer.
This guide is for executors and families in that position. It explains where the executor's power to sell comes from, how probate timing affects a sale, why valuation and tax matter, and what a buyer will expect.
Start with what the estate actually owns
The first question is what form the business took, because that decides what the executor is selling.
- A sole proprietorship. The deceased owned the business assets personally: equipment, inventory, contracts, goodwill. Those assets form part of the estate, and the executor sells them.
- Shares of a company. If the business was run through a corporation, the company still owns the business. The estate owns the shares, and the executor deals with them as a shareholder.
- A partnership or a company with other owners. A partnership agreement or shareholder agreement may give the other owners a right, or an obligation, to buy the deceased's interest at a set price or by a formula. Check this before you talk to outside buyers.
Our article on what happens to company shares when an owner dies covers share transfers, company records and buy-sell clauses in more detail.
Where the executor's authority comes from
Under s 142 of the Wills, Estates and Succession Act (WESA), a personal representative has the same authority over the estate as the deceased would have if living, subject to any contrary intention in the will and to other laws. Many wills also give the executor express powers to carry on a business, to sell it and to decide the timing.
Read the will closely. It may restrict a sale, give a family member a right to buy, or name a different person to deal with business assets. If the will is silent or unclear, or if there is no will, get advice before committing to a sale.
In practice, buyers, banks, landlords and registries will usually want to see a grant of probate, or a grant of administration, before they deal with an executor. You can prepare for a sale while the application is in progress, but closing usually waits for the grant. Our step-by-step guide to executor duties explains the probate process itself.
Keeping the business running in the meantime
An executor has a duty to protect estate assets, and a business that stops trading can lose much of its value. Early steps often include:
- making sure someone has signing authority for the business bank account, payroll and suppliers;
- for a company, confirming who the directors are and, if the deceased was the only director, arranging for a new director so the company can act;
- checking insurance, leases, licences and key contracts, especially any that end or can be terminated on the owner's death;
- talking to key staff and customers to preserve goodwill; and
- keeping careful records, because you will have to account to the beneficiaries.
If running the business is beyond what the executor can reasonably do, a short-term manager or an early sale may be the better choice.
Timing: selling is not the same as distributing
WESA s 155 says the personal representative must not distribute the estate within 210 days after the grant is issued, except by court order or with the required consents. Where there is a will, those consents come from all beneficiaries with an interest in the estate and everyone who could bring a wills variation claim; where there is no will, from all intestate successors entitled to a share.
That rule limits paying out the estate, not selling its assets. An executor can usually sell the business within the 210 days and hold the proceeds. It is still worth knowing whether a wills variation claim is likely, since a claim must generally be started within 180 days of the grant (s 61) and can affect how and when the proceeds are paid out.
Valuation and tax
Under s 70(5) of the Income Tax Act, a person is generally deemed to have disposed of their capital property, including shares, at fair market value immediately before death, and the resulting gain is reported on the final return. There are exceptions, notably for property passing to a spouse or a spousal trust under s 70(6). Because the tax is based on value at death, a professional valuation is often needed both for tax and to show beneficiaries that the sale price was fair. Your accountant should be involved early, because how the sale is structured can change the overall tax result.
How the sale itself works
Once a buyer is found, the sale looks much like any other business sale, with a few estate-specific points:
- Shares or assets. Buyers often prefer to buy assets; sellers often prefer to sell shares. The choice affects tax, liabilities and the paperwork needed.
- Limited knowledge. An executor may not know the business as well as the owner did, so the representations and warranties they give, and any holdback, need careful negotiation.
- Conflicts. If the executor, a beneficiary or a family member wants to buy, the price and process need extra care, and beneficiary consent or court approval may be appropriate.
Our overview of the legal process for selling a business in BC walks through letters of intent, due diligence and closing.
Selling a business as an executor? Plan the sale before you list it
Our business purchase and sale lawyers can review what the estate owns and any shareholder agreement, advise on structuring the sale as shares or assets, negotiate with buyers and prepare the purchase agreement and closing documents.
Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.
Sources
General information about British Columbia law as at the date shown, not legal advice. Reading this article does not create a lawyer-client relationship. Please speak with a lawyer about your own circumstances.