While every Canadian province or USA state has their particular definitions and legal requirement, the basic regulations are as follows:
The particular update that applies to providing advice on Buying or Selling a Business in Alberta is summarized in an update bulletin revised and published in 2009. To review the Real Estate Act update bulletin on Broker requirements, go to this page: http://www.reca.ca/consumers/content/legislation-bulletins/information-bulletins/business-brokerage.html
The Alberta Real Estate Act is considered one of the best in North America. To review the Real Estate Act itself, please go to this page: http://www.reca.ca/consumers/content/legislation-bulletins/real-estate-act.htm
What you as the business owner needs to know:
1) If selling shares only without any advice on leases, rental contracts, or land & building, you do not require a licensed commercial real estate agent.
2) If selling assets only and without any advice on leases, rental contracts, or land & building, you do not require a licensed commercial real estate agent.
3) If you will require advice on leases, rental contracts, or land & building, you will require a licensed commercial real estate agent.
To comply with the Real Estate Act the MAXIMA Divestures Group Inc. owns and operates a licensed commercial real estate brokerage: MAXDG Commercial Inc.
Update to Real Estate Act - Last revised March 2009:
Summary: The term “business” was removed from the definition of “real estate” in 2008. However, when an individual is engaged to represent a seller or buyer in the sale or purchase of a business that includes a real estate component, the Real Estate Act will apply, but only to the trade of real estate. [See: Real Estate Act s.1(1)(u),s.1(1)(x)]
In July 2008, amendments were made to the Real Estate Act. The word “business” was deleted as a defined term and “business” is no longer part of the definition of “real estate” in the Real Estate Act.
If a person is hired to sell a business, for the purposes of the Real Estate Act, the following will apply:
- Where the sale of a business involves the sale of shares, whether or not “real estate” as defined in Real Estate Act is transferred as a result of the share sale, the Real Estate Act will not apply. Shares are being traded, not real estate and therefore the Real Estate Act does not apply.
- Where the sale of the business involves the sale of the business assets as opposed to the sale of shares and a business asset is “real estate” as defined in the Real Estate Act, the Real Estate Act will apply but only to the trade of real estate and not to other potential assets in the business sale.
- Where the sale of the business begins as an asset sale and later changes to a share sale, and a business asset is “real estate” as defined in the Real Estate Act, the Real Estate Act will apply but only to the trade of real estate while a business asset and not to the sale of shares.
As a result of the amendments, the Real Estate Act no longer regulates business brokerage. It is only the real estate component of any sale in business assets that is governed by the Real Estate Act.
Note: each state has particular regulations and co-regulations around real estate and mergers and acquisitions. The general rule for consideration is real estate in any form requires a commercial real estate licence. To legally provide advice on the sale of a business typically requires some form of securities certification.
For clarification: To perform these services in the US, an advisor must be a licensed broker dealer, and subject to SEC (FINRA) regulation. Other countries have similar regulatory schemes.
Financial Industry Regulatory Authority or FINRA - http://www.finra.org/AboutFINRA/
It is common to see requirements for registration with Security Investor Protection Corporation - http://www.sipc.org
For a Chartered Financial Analyst or equivalent - http://
There is one important exception for most of the North American market place: Lawyers are exempt from the general real estate acts and are allowed to provide a broad range of advisory services. While some restrictions apply this can be confirmed through your due diligence process.
To protect your investment and position in a transaction we strongly recommend you complete your due diligence on the regulations for your area particularly when you are being approached to sell your business by a “brokerage business” from another province/state.