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Corporate, Cross-Border

Differences between U.S., Canadian transaction documents

Canadian lawyers engaged in cross-border mergers, acquisitions and divestitures are often presented with transaction documents drafted by American lawyers — documents which have important and often subtle differences, writes Toronto business lawyer Bill Northcote in The Lawyers Weekly.

The Shibley Righton LLP partner and head of the firm’s business group writes, “until recently most transactions lawyers could rely only upon their own experience, which of course is largely anecdotal, for understanding these differences.”

Northcote writes that two recently published studies put out by the American Bar Association outline how transactions details were addressed in private M & A transactions on each side of the Canadian and American border in apparently wholly domestic transactions.

“A comparative analysis of the two studies reveals some interesting trends regarding transaction provisions in the Canadian and U.S. markets that are especially valuable when considering cross-border deals and transactions,” he writes in the article.

Northcote discusses four significant distinctions in-depth, including: materiality carve-outs; sandbagging or anti-sandbagging contractual provisions; the difference in survival periods for representations and warranties; and the difference in limitations on a vendor’s liability in damages or for indemnification.

He says it is crucial to keep these four differences in mind when negotiating or drafting a cross-border transaction, "as standards, norms and expectations may vary depending on the jurisdiction of each party,” he writes in The Lawyers Weekly. “Knowledge of the differences can ensure that you understand the legal and business environment in which your client’s counterparty operates and enables you to negotiate more effectively.”

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