Not All Lawyers Are the Same

When you are entering into a share purchase agreement, it is critical to hire a business lawyer, not a general or real estate lawyer. This distinction is not academic; it can cost you tens of thousands of dollars if done wrong.

Here’s a real-life example from a daycare operator.

The operator was selling the shares of her daycare business. She hired a real estate lawyer to handle the share purchase agreement. During negotiations, the concept of Net Working Capital (NWC) came up. Unfortunately, neither the operator nor the lawyer fully understood what NWC actually meant.

The lawyer “volunteered” a significant amount, something like $25,000 to $50,000, as Net Working Capital. The assumption was that this amount worked like a holdback which would be returned to the seller after a certain period.

That assumption was completely wrong.

Net Working Capital is not a holdback. It is cash that must remain in the business at closing so the buyer can operate the company immediately – pay staff, cover expenses, and run day-to-day operations. That money is effectively given to the buyer and is not returned to the seller after closing.

That single misunderstanding resulted in a massive, unnecessary financial loss.

Industry Knowledge Matters – A Lot

Every profession has nuances and specialties. The daycare industry is especially complex and has requirements that many general or real estate lawyers are simply not familiar with.

For example:

Ministry notifications and approvals
CWELCC implications
The order of closing vs. licence transfer

In real daycare transactions, the deal must close first before the licence can be transferred. Yet many lawyers unfamiliar with daycare deals mistakenly insert conditions stating that the transaction will collapse if the licence is not transferred before closing, which is not even feasible in practice.

Deals may be delayed, renegotiated, or almost fall apart entirely because the lawyer did not understand how daycare transactions actually work.