Anonymised, illustrative composite. The asset list said the target owned its production-scheduling system. The licence agreement said something different: the account belonged to the founder personally, and it did not transfer with a change of ownership.
At a glance
A buyer agreed to acquire 100% of the shares of a precision manufacturer generating $6.8 million in annual revenue. The company’s entire production schedule — job sequencing, machine allocation, delivery commitments — ran through a single third-party scheduling application. The seller’s asset schedule listed the software among the company’s operating systems, alongside its accounting package and its customer database.
Technology diligence found otherwise. The scheduling software’s licence had been set up years earlier by the founder, personally, under an individual professional-tier subscription paid from his own credit card and later reimbursed through the corporation’s books — but the account itself, and the contractual relationship with the vendor, belonged to him as an individual, not to the corporation. The corporation had never held any right to it in the first place; there was nothing for the corporation to assign, because privity of contract meant the licence agreement had only ever bound the founder and the vendor.
The vendor’s professional-tier terms, read directly, were explicit that the subscription was “licensed to a named individual user and may not be transferred, assigned, or sublicensed.” A change of corporate ownership did not touch the licence at all — it simply left the buyer’s newly acquired company running its entire shop floor on software it had no legal right to keep using once the founder’s involvement ended.
The founder’s professional-tier subscription cost $42,000 a year. The vendor confirmed only its corporate/enterprise tier was transferable to a new corporate account holder, and quoted that tier at $58,000 a year for the same seat count and functionality — a $16,000 annual premium over what the company had actually been paying. The buyer’s counsel made procurement of a corporate-tier licence, in the corporation’s own name, a condition precedent to closing.
To fund the transition, the parties agreed a $48,000 credit against the purchase price at closing — $16,000 a year for three years, the period the buyer’s integration plan assumed before any decision on replacing the system entirely. The seller absorbed the shortfall between what it had been paying personally and what running the business properly, in the corporation’s own name, actually cost.
The fix did not depend on a statute forcing the licence to transfer — it does not, and no Canadian law compels a software vendor to assign a personal subscription to a new corporate owner. What decided the outcome was a closing mechanic: a condition precedent requiring written confirmation that a corporate-tier licence, held by the target corporation itself, was active before the buyer would fund the acquisition, structured the same way a purchaser would use an escrow or holdback for any other closing condition that has to be satisfied, not merely promised, before money moves — consistent with how the sister firm's own drafting guidance treats closing-mechanics generally (treadstonelaw.ca).
Had the buyer closed on the asset schedule’s word that the software was a company asset, the corporation would have kept operating on the founder’s personal, non-transferable account for as long as he chose to leave it active — a business-critical dependency resting entirely on the goodwill of someone no longer employed by, or accountable to, the company. The moment that account lapsed or the vendor noticed the change in ownership, the buyer would have faced an emergency, uncosted migration under production pressure, rather than a planned, priced-for transition completed before the deal even closed.
The tell is the billing trail, not the asset list: a software subscription paid from a personal credit card and reimbursed through expenses, rather than billed directly to a corporate account, is licensed to the person doing the reimbursing, not to the entity reimbursing them. A systems and subscriptions audit that cross-checks every material application against who actually holds the account — the corporation’s own name and billing details, not just who uses it day to day — catches this before it becomes a closing surprise.
The corporate-tier licence was active in the target corporation’s own name three weeks before closing, confirmed in writing by the vendor, and the deal closed with the $48,000 credit applied against the purchase price. The buyer never had a day of ownership in which its production schedule depended on an account it did not control.
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