How quickly a fund actually controls a target's cash on closing day is not a banking question. It is answered entirely by whether the deal is a share purchase or an asset purchase.
Key takeaways
Deal teams tend to treat banking as an administrative afterthought, something the finance function sorts out after the lawyers finish. That ordering works on an asset purchase, where new accounts have to be opened regardless of when the paperwork gets done. It does not work on a share purchase, where the accounts a sponsor is about to control already exist, already carry whatever governance and security arrangements the seller put in place, and change hands the moment shares do — whether or not anyone on the buy side has actually read what governs them.
In a share purchase, the target corporation is the same legal person before and after closing, and so are its bank accounts. What changes is control of the board and, through it, who the bank recognizes as authorized to operate the accounts — new signing authority is a matter of a fresh board resolution, filed with the bank, not a new banking relationship. Whoever signs that resolution as a director takes on the statutory duty in CBCA s.122(1) to “act honestly and in good faith” and exercise “the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances” — a real duty attaching to a document a deal team can otherwise treat as pure formality. If the buyer intends to install directors who are not Canadian residents, s.105(3) requires at least 25% of the board to be resident Canadians, or at least one director where the board has fewer than four — worth confirming before assuming a new board can be seated and pass a banking resolution on the timeline the deal team wants.
If the target already operates under a unanimous shareholder agreement — restricting who can authorize payments, or requiring a second signature above a threshold — CBCA s.146(3) provides that “a purchaser or transferee of shares subject to a unanimous shareholder agreement is deemed to be a party” to it, automatically, on closing. A buyer who assumes it can simply layer its own banking and signing template onto a newly acquired subsidiary, without first confirming whether an existing USA already governs that authority, may find it is bound by terms it never negotiated. The same section cuts the other way, too: under s.146(4), a purchaser who was not given proper notice of the USA before closing “may, no later than 30 days after they become aware” of it, rescind the transaction — a real, sourced reason to confirm at diligence, not after closing, whether a USA exists and whether it was disclosed.
An asset purchase gives the buyer’s new acquiring entity no banking history at all — no existing accounts, no merchant processor relationship, no payroll direct-deposit enrollment. Every one of those has to be established and tested before the transition date, or the business loses the ability to pay a supplier or run payroll for however long the gap lasts. This is squarely a share-versus-asset consequence: see choosing between a share deal and an asset deal for why sellers and buyers pull in opposite directions on structure, and working through the closing checklist for where banking sits among the other deliverables that have to close in the same window.
The GST/HST election under ETA s.167 adds a specific payment-systems dependency on an asset deal: the election is only available where the buyer is a registrant, and it must be filed by the buyer’s first reporting period — meaning invoicing and remittance under the new entity’s own GST/HST number needs to be functioning from day one, not stood up gradually once the dust settles.
Operating credit facilities are routinely secured against a target’s bank accounts and receivables under a general security agreement, registered on the province’s personal property registry. British Columbia’s Personal Property Security Act is representative of the common-law provinces’ approach: its registration provisions, addressed in Part 3 — Perfection and Priorities, include a security-interests-in-proceeds provision and an amendment-or-discharge provision governing exactly this — a registration against the target has to be dealt with, by discharge, assignment or postponement, before a new lender will accept a first-priority position over the same accounts. Running that search early, not on closing day, is the point of a PPSA registration search — the fastest way to see, before funds move, exactly which of a target’s accounts and assets already have a secured creditor standing behind them.
The same share-versus-asset logic extends past the account to what runs on top of it. Pre-authorized debit mandates, Interac e-Transfer profiles and payroll direct-deposit enrollments are all tied to the account and the legal entity behind it, not to the business's brand or its day-to-day operators — on a share purchase they continue uninterrupted along with the account itself, subject only to updating who is authorized to administer them. On an asset purchase every one of those has to be rebuilt from nothing under the new entity, which is exactly why establishing and testing them before the transition date, rather than after, belongs on the closing checklist as its own line item rather than folded into “open a bank account.”
A sponsor is buying 100% of a target’s shares. The target’s existing bank accounts, tied to its GST/HST registration and its merchant processor agreement, are unaffected by the share transfer — no new account applications, no re-enrollment. The deal team’s pre-closing checklist instead confirms three things: a PPSA search against the target shows one registration, from the seller’s existing operating lender, which is being discharged concurrently with the payout of that facility from sale proceeds; no unanimous shareholder agreement exists that would bind the buyer under s.146(3); and the new board, seated at closing, passes a banking resolution naming the sponsor’s finance lead and one existing target employee as joint signers above a set dollar threshold. None of that required a new bank account — all of it required confirming, in advance, what already existed.
No. The target corporation is unchanged, so its existing accounts continue -- what changes is who is authorized to operate them, through a new board resolution.
Under CBCA s.146(3), a purchaser of shares subject to a USA is automatically deemed a party to it on closing. Confirm whether one exists, and whether the buyer was properly notified of it, before closing -- s.146(4) gives an un-notified purchaser a 30-day rescission right once they learn of it.
The sourced material does not carry a specific timing rule -- the operational point is that payment infrastructure (accounts, merchant processing, payroll enrollment, GST/HST registration) has to be tested and live before the transition date, since an asset purchase starts with none of it in place.
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