Can the NB Small Business Investor Tax Credit Program Help Finance the Purchase of Distressed Business Assets?

Buying the assets of a distressed small business can be an opportunity to preserve jobs, keep useful equipment in service, and restart a viable operation under stronger ownership. In New Brunswick, one possible source of investor motivation is the New Brunswick Small Business Investor Tax Credit Program, often called the NB SBITC Program.

The NB Small Business Investor Tax Credit Program is designed to encourage eligible New Brunswick investors to invest in eligible New Brunswick small businesses. The program may provide a non-refundable provincial tax credit to eligible investors who buy eligible shares of a registered corporation.

However, the program is not a simple subsidy for buying someone else's business. It is not a grant to the buyer. It is not a loan. It is not a tax credit for purchasing used equipment. It is an investor tax credit program connected to the purchase of eligible shares issued by a corporation that has been registered under the program.

That distinction matters.

If you are trying to use the NB SBITC Program as part of a transaction to buy the assets of a distressed small business, the structure, timing, documentation, professional advice, and valuation support all matter. This page explains the general process and where different professionals, including ALP Ltd. for machinery and equipment appraisal, may be involved.

This page is general information only. It is not legal, tax, accounting, securities, investment, or financial advice. Before attempting this type of transaction, speak with a New Brunswick lawyer, CPA, tax advisor, Licensed Insolvency Trustee, and other qualified professionals.

The Basic Idea

A distressed business may own equipment, machinery, fixtures, vehicles, tools, inventory, intellectual property, customer relationships, leasehold improvements, or other operating assets.

A buyer may want to form or use a New Brunswick corporation to raise investor capital, acquire selected assets, and continue the business in a healthier structure.

The possible SBITC-related idea is:

1.      A New Brunswick corporation prepares an investment plan.

2.      The corporation applies to be registered under the NB Small Business Investor Tax Credit Program.

3.      Eligible investors subscribe for newly issued eligible shares of that corporation.

4.      The corporation uses the capital for approved purposes that benefit its New Brunswick operations.

5.      Where the rules permit, some of that capital may be used to acquire assets of a distressed business.

6.      The investors receive tax credit certificates if the program requirements are satisfied.

7.      The investors must generally hold the shares for the required holding period.

The complicated part is that the program has restrictions on how the money can be used. In particular, the province lists prohibited uses of capital. These include purchasing services or assets at a price greater than fair market value, purchasing shares of another person, redeeming previously issued shares, paying dividends, and funding the purchase of assets of an existing proprietorship, partnership, joint venture, trust, or company, except where that entity is in receivership or bankruptcy and the investor ownership restriction is satisfied.

Because of this, an asset purchase from a distressed business is not something to improvise. It should be structured and reviewed before money changes hands.

Important Warning:
Distressed Is Not Always the Same as Legal Insolvency

Many business owners describe their company as distressed, failing, struggling, insolvent, behind on payments, or in trouble.

Those words do not necessarily mean the business is in receivership or bankruptcy.

This matters because the NB Small Business Investor Tax Credit Program restricts the use of raised capital to fund the purchase of assets of an existing business, except in specific circumstances involving receivership or bankruptcy.

In many real transactions, the buyer and seller find each other before the business has entered a formal insolvency process. The seller may already know the business cannot continue. The buyer may be willing to acquire the equipment, fixtures, inventory, customer relationships, or other useful assets, but may not want to assume the debts, liabilities, leases, employee obligations, or other problems of the old company.

In that situation, the buyer and seller may approach a Licensed Insolvency Trustee, often called an LIT, to discuss whether a formal insolvency process is appropriate. The LIT's role is not to help the parties avoid the rules. The LIT's role is to review the financial condition of the company, explain the insolvency options, protect the integrity of the process, and, where appropriate, administer a legal insolvency proceeding.

If the company is truly insolvent and a formal process is appropriate, the sale of assets may be conducted through a receivership, bankruptcy, proposal, or other insolvency-related process. The exact structure should be determined by the LIT, legal counsel, secured lenders, and other affected parties.

This distinction is important. A business should not be pushed into insolvency merely as a financing tactic. But where the business is already insolvent or no longer viable, a formal insolvency process may provide the legal structure needed to sell assets cleanly, deal with creditors, and allow a buyer to restart useful operations under a new corporation.

Why Fair Market Value Matters

The NB SBITC Program includes a restriction against using funds raised through the share offering to purchase services or assets at a price greater than fair market value.

For equipment-heavy businesses, this can make an independent machinery and equipment appraisal important.

Examples include:

·      A manufacturer buying used production equipment from a failed competitor.

·      A food processor acquiring packaging, refrigeration, or processing equipment from a distressed operator.

·      A machine shop purchasing CNC machines, welders, compressors, tooling, and shop equipment.

·      A restaurant group buying fixtures, kitchen equipment, and leasehold improvements from a business in receivership.

·      A construction or trades company acquiring trucks, trailers, tools, and specialized equipment.

·      A brewery, winery, distillery, or beverage company acquiring tanks, bottling lines, kegs, refrigeration, or production assets.

·      A woodworking, metal fabrication, printing, agricultural, or value-added processing business buying equipment from an insolvent operator.

In these situations, an independent appraisal can help the buyer, investors, lenders, lawyers, accountants, Licensed Insolvency Trustee, and government reviewers understand whether the proposed purchase price is supportable.

ALP Ltd. provides independent machinery and equipment appraisal services for these types of situations.

Where ALP Ltd. Fits in the Process

ALP Ltd. does not approve SBITC applications. ALP Ltd. does not provide legal, tax, securities, or accounting advice.

ALP Ltd. helps with a specific and important part of the file: the independent valuation of machinery, equipment, fixtures, and other tangible business assets.

An ALP Ltd. appraisal may help:

·      Support fair market value for equipment and asset purchases.

·      Assist lawyers in drafting and reviewing transaction documents.

·      Assist CPAs and tax advisors in understanding the tangible asset values involved.

·      Help investors understand what operating assets are being acquired.

·      Help lenders assess collateral value.

·      Help buyers avoid overpaying for used equipment.

·      Support the investment plan when capital will be used to acquire or improve operating assets.

·      Provide documentation for files where the use of proceeds may later be reviewed.

·      Assist a Licensed Insolvency Trustee, receiver, trustee in bankruptcy, secured lender, or court in understanding the equipment value being transferred.

In a distressed transaction, asset value can be unclear. The seller may be under pressure. Records may be incomplete. Equipment may be old, specialized, modified, poorly maintained, or difficult to compare with normal market listings.

A qualified equipment appraisal can bring discipline to the transaction before the buyer commits investor money.

Step-by-Step Process for a Possible SBITC-Supported Distressed Asset Purchase

The following is a general process. The exact sequence may change depending on the seller's condition, the buyer's structure, the financing plan, and the advice of legal and tax professionals.

Step 1: Identify the Distressed Business and the Assets Being Considered

The process usually starts when a buyer identifies a troubled business with assets that could be useful in a new or restructured operation.

The buyer should make a preliminary list of the assets being considered. This may include machinery, equipment, vehicles, furniture, fixtures, tools, computers, leasehold improvements, inventory, trade names, customer lists, contracts, and other operating assets.

At this early stage, the buyer should separate two questions:

1.  Is there a viable business opportunity?
2. Can the NB SBITC Program be used as part of the financing structure?

The answer to the first question is commercial. The answer to the second question requires legal, tax, accounting, insolvency, and program-specific review.

Step 2: Determine Whether the Seller Is Distressed, Insolvent, in Receivership, or Bankrupt

Before building an SBITC strategy around the asset purchase, the buyer's lawyer should determine the actual legal and financial status of the seller.

The seller may be:

·      Still operating, but losing money.

·      Behind with suppliers, lenders, landlords, tax authorities, or employees.

·      Informally distressed, but not in a formal insolvency process.

·      Insolvent, but not yet in bankruptcy or receivership.

·      Subject to lender enforcement.

·      In receivership.

·      In bankruptcy.

·      Selling through a court-approved, lender-controlled, or trustee-administered process.

This matters because the SBITC rules restrict the use of raised capital to fund the purchase of assets of an existing business, except in specific circumstances involving receivership or bankruptcy.

In many practical situations, the buyer and seller may find each other before a formal insolvency process has started. The seller may want a solution, the buyer may want the assets, and both parties may understand that the existing company cannot survive in its current form.

At that point, the parties should not simply paper the transaction as an ordinary asset sale and assume the SBITC rules will work. Instead, the buyer, seller, their lawyers, and a Licensed Insolvency Trustee should review whether the company is actually insolvent and whether a formal insolvency process is appropriate.

If a formal insolvency process is appropriate, the LIT may become involved in administering the process or helping the parties understand the available options. The sale may need to be conducted in a way that respects the rights of creditors, secured lenders, employees, landlords, tax authorities, and other stakeholders.

The buyer should also understand that once a formal insolvency process begins, the transaction may not be entirely under the buyer's and seller's private control. The process may require approvals, notices, creditor involvement, lender consent, court approval, or competing bids.

Step 3: Decide Whether the Transaction Is a Normal Asset Purchase or an Insolvency Asset Purchase

After the seller's status is understood, the professional team should decide what kind of transaction is actually possible.

A normal asset purchase may be possible where the seller is not in a formal insolvency process, but this may create problems if the buyer intends to use SBITC-raised funds to buy assets of an existing business.

An insolvency asset purchase may be possible where the company is in receivership or bankruptcy, or where a Licensed Insolvency Trustee and legal counsel determine that a formal insolvency process is appropriate because the company is truly insolvent.

This is a key planning point.

The buyer should not assume that a distressed seller automatically qualifies for the receivership or bankruptcy exception. The professional team should confirm the legal status, the process, the permitted use of funds, and the documentation required before investor money is raised.

Step 4: Assemble the Professional Team Early

A transaction involving distressed assets, investor tax credits, and a new or existing corporation should not be handled casually.

The professional team may include:

Business Lawyer or M&A Lawyer

The lawyer helps structure the transaction, review eligibility issues, prepare purchase agreements, address liabilities, review share terms, coordinate closings, and manage legal risk.

Tax Advisor

The tax advisor helps the buyer and investors understand tax consequences, including the limits of the tax credit, non-refundable credit treatment, timing, and investor-specific issues.

CPA

The CPA helps with financial statements, business planning, due diligence, working capital analysis, accounting treatment, projections, and purchase price allocation.

Securities Lawyer

Because the SBITC Program involves issuing shares to investors, securities law may be involved. A securities lawyer can help determine what exemptions, investor documents, risk disclosures, and subscription agreements are required.

Licensed Insolvency Trustee

If the seller is already insolvent, or if the buyer and seller believe the transaction may need to occur through a formal insolvency process, a Licensed Insolvency Trustee should be consulted early. The LIT can review the seller's financial situation, explain the available insolvency options, and, where appropriate, administer or assist with a legal insolvency process. This may be important where a buyer wants to acquire selected assets but not assume the old company's liabilities. In some situations, a buyer and seller may approach an LIT together after agreeing in principle that the business cannot continue in its current form and that a sale of assets may be the best available outcome. The LIT will need to consider the interests of creditors and the legal requirements of the insolvency process. The buyer and seller should not assume they can control the process simply because they have found each other.

Equipment Appraiser

ALP Ltd. can provide an independent appraisal of machinery, equipment, fixtures, vehicles, and other tangible assets. This can help support fair market value and assist the buyer, investors, lenders, lawyers, accountants, and the Licensed Insolvency Trustee.

Lender

Even where investor equity is being raised, lenders may be involved for operating lines, equipment loans, real estate, or post-acquisition working capital.

Insurance Advisor

The insurance advisor helps ensure the acquired assets and new operations are properly insured from closing onward.

Step 5: Decide Whether to Use an Existing Corporation or a New Corporation

A buyer may consider using an existing New Brunswick corporation or forming a new corporation to acquire the assets and operate the business.

The corporation seeking to use the NB SBITC Program must satisfy the program's eligibility rules. These include requirements related to being a private company, being incorporated or registered to carry on business in New Brunswick, having authorized capital consisting of shares without par value, meeting the net tangible asset threshold, generating active business income, and satisfying wage and residency requirements after registration.

This decision should be reviewed by the lawyer and CPA.

A new corporation may offer a cleaner structure if the goal is to acquire selected assets without taking on unwanted liabilities from the distressed seller. However, the corporation still needs a credible business plan, eligible investors, a proper share structure, and a compliant use of capital.

Step 6: Review Whether the Proposed Use of Capital Could Fit the SBITC Rules

This is one of the most important steps.

The program requires an investment plan that explains the proposed use of the capital raised. The use of capital must benefit the operations of the applicant corporation located in New Brunswick.

Before applying, the buyer's lawyer and tax advisor should review whether the proposed use of funds is permitted.

Questions to ask include:

·      Will the SBITC-raised money be used to buy shares of another corporation? If so, that may be prohibited.

·      Will the money be used to buy assets of an existing business? If so, is the seller in receivership or bankruptcy?

·      If the company is not yet in a formal insolvency process, has a Licensed Insolvency Trustee reviewed whether a formal process is appropriate?

·      Will the money be used to pay more than fair market value for services or assets? If so, that may be prohibited.

·      Will the money be used to pay dividends, redeem shares, or retire shareholder liabilities? If so, that may be prohibited.

·      Will the money be invested outside New Brunswick? If so, that may be prohibited.

·      Will the money be used for land? If so, special restrictions may apply.

·      Will the money be used for equipment, working capital, improvements, hiring, production, or other operating purposes in New Brunswick? These uses may be more consistent with the program's objective, but still require review.

This is where ALP Ltd. may become involved if the plan includes acquiring machinery, equipment, fixtures, or other tangible operating assets.

Step 7: Obtain an Independent Equipment Appraisal Before Finalizing the Asset Price

If the proposed transaction involves machinery, equipment, fixtures, vehicles, tools, or other tangible business assets, the buyer should consider obtaining an independent appraisal before finalizing the purchase price.

The appraisal can help answer questions such as:

·      What equipment is actually present?

·      What is the condition of the equipment?

·      What is the fair market value?

·      Is the proposed purchase price supportable?

·      Are some assets obsolete, missing, damaged, specialized, or overvalued?

·      Would a lender view the equipment as meaningful collateral?

·      Would investors be comfortable with the amount being allocated to tangible assets?

·      Would a Licensed Insolvency Trustee, receiver, lender, or court want independent support for the proposed sale price?

·      Does the investment plan need supporting documentation for the proposed use of funds?

ALP Ltd. can catalogue, research, and report on the value of machinery and equipment so that the transaction file contains independent support for the asset values.

In a distressed or insolvency-related business purchase, this is especially useful because asking prices, book values, tax values, lender expectations, and actual market value may all be different.

Step 8: Build the Acquisition Budget and Capital Plan

The buyer, CPA, lawyer, and other advisors should prepare a full capital plan.

The plan should identify:

·      Purchase price for equipment and other assets.

·      Working capital needed after closing.

·      Repair, maintenance, relocation, or installation costs.

·      Professional fees.

·      Insurance costs.

·      Lease deposits or facility costs.

·      Employee restart costs.

·      Inventory requirements.

·      Sales and marketing costs.

·      Debt financing, if any.

·      Investor equity required.

·      Contingency reserve.

A distressed asset purchase often costs more than the purchase price. Equipment may need to be moved, repaired, certified, cleaned, reinstalled, or integrated into a new operation. Employees may need to be rehired. Customers may need to be reassured. Suppliers may require COD terms.

The investment plan should not simply say, "We are buying assets." It should explain how the capital will be used to create or continue an active business in New Brunswick.

Step 9: Prepare the SBITC Investment Plan

The SBITC investment plan is central to the application.

For a corporation, the investment plan should generally identify the amount of capital to be raised, the proposed use of capital, investor information, share subscriptions, existing shareholdings, the company's major business activities and revenue sources, the percentage of assets used in each activity, wages and salaries, employees, and export revenue.

In a distressed asset acquisition scenario, the plan should be especially clear about:

·      The business opportunity.

·      The assets being acquired.

·      Why the assets are useful to the New Brunswick operation.

·      Whether the seller is in receivership or bankruptcy, if that exception is being relied upon.

·      If the seller is not yet in receivership or bankruptcy, whether an LIT has reviewed the situation and whether a formal insolvency process is appropriate.

·      The fair market value support for the asset purchase.

·      How the acquisition will benefit the applicant corporation's New Brunswick operations.

·      How the company will satisfy the program's active business and wage requirements.

·      How investor funds will be segregated from prohibited uses.

ALP Ltd.'s equipment appraisal may be attached or summarized as part of the supporting due diligence package, depending on the advice of counsel.

Step 10: Confirm Investor Eligibility

The SBITC Program has investor eligibility requirements.

Eligible individual investors must generally be New Brunswick residents and at least 19 years old. Eligible corporation or trust investors must generally have a permanent establishment in New Brunswick. The program also has minimum investment amounts and requires a minimum number of investors.

The lawyer, CPA, and tax advisor should help confirm investor eligibility before the application is submitted.

The investors should also understand that the province does not guarantee the value of the shares or the financial condition of the company. The tax credit does not eliminate investment risk.

Step 11: Apply for a Certificate of Registration

The applicant corporation applies to the New Brunswick Department of Finance and Treasury Board for a Certificate of Registration under the SBITC Program.

The application package may include the investment plan, financial statements, tax information, corporate records, investor statements, director certifications, and other required forms.

The corporation should not assume approval. The proposed transaction should be reviewed before it is submitted, especially where distressed assets are involved.

Step 12: Close the Share Subscription

Once the corporation is approved and the timing is confirmed, the eligible investors subscribe for newly issued eligible shares.

The program is connected to the issue of eligible shares. It is not a credit for buying existing shares from current shareholders.

The share subscription documents should be prepared or reviewed by legal counsel. They may include subscription agreements, investor acknowledgements, risk disclosures, board approvals, share certificates, and securities law exemption documents.

Investors should understand the holding period. The shares generally must be held for four years, or the tax credit may have to be repaid with interest.

Step 13: Close the Asset Purchase

The asset purchase should be coordinated carefully with the share subscription and SBITC requirements.

The purchase agreement should identify the assets being acquired, excluded assets, assumed liabilities if any, closing deliverables, representations, taxes, liens, releases, transfer documents, and possession arrangements.

If the seller is in receivership or bankruptcy, the Licensed Insolvency Trustee, receiver, trustee in bankruptcy, secured lender, court, or insolvency counsel may be involved.

If the buyer and seller approached an LIT before the formal process began, the final closing should still respect the structure and approvals required by that process. The buyer should not treat the insolvency process as a private shortcut around creditors or other stakeholders.

The purchase price allocation should be reviewed by the CPA and tax advisor. The equipment portion should be supported by appraisal evidence where appropriate.

ALP Ltd.'s appraisal can help the buyer and advisors support the amount being paid for machinery, equipment, fixtures, and related tangible assets.

Step 14: Apply for Investor Tax Credit Certificates

After eligible shares are sold, the corporation must apply for tax credit certificates for the investors within the required deadline.

The corporation must provide proof of sale and required investor information to the province.

Investors then use the tax credit certificates when filing their provincial income tax returns, subject to the program rules and their own tax circumstances.

Step 15: Operate the Business and Maintain Compliance

The work does not end at closing.

The corporation must continue to satisfy ongoing requirements. These may include holding-period rules, restrictions on redemption or transfer of shares, annual reporting, wage and residency requirements, recordkeeping, and compliance with the investment plan.

The buyer should maintain a file that includes:

·      SBITC application materials.

·      Certificate of Registration.

·      Investment plan.

·      Investor subscription documents.

·      Tax credit certificate applications.

·      Asset purchase agreement.

·      Licensed Insolvency Trustee, receiver, trustee, court, or lender documents if the sale occurred through a formal insolvency process.

·      Equipment appraisal.

·      Financial statements.

·      Corporate records.

·      Board approvals.

·      Evidence of use of funds.

·      Wage and employee records.

·      Annual reporting documents.

If the use of funds is ever reviewed, the company should be able to show where the money went and why the transaction complied with the program.

Common Mistakes to Avoid

Mistake 1: Assuming the Tax Credit Applies to Any Business Purchase

The program is not a general business acquisition subsidy. It is tied to eligible investors buying eligible shares of a registered corporation.

Mistake 2: Using SBITC-Raised Funds to Buy Existing Shares

The program is based on newly issued shares. Buying shares from an existing shareholder is a different transaction and may not qualify.

Mistake 3: Treating a Struggling Business as Though It Is in Bankruptcy

A business can be failing without being in receivership or bankruptcy. The distinction is important when considering asset purchase restrictions.

Mistake 4: Treating the Insolvency Process as a Private Deal Mechanism

In some real transactions, the buyer and seller may approach a Licensed Insolvency Trustee together. That does not mean the buyer and seller control the process. The LIT, secured lenders, creditors, courts, and other stakeholders may have rights that must be respected.

Mistake 5: Paying an Unsupported Price for Equipment

The program restricts purchases above fair market value. If machinery, equipment, or fixtures are material to the transaction, an independent appraisal can help support the file.

Mistake 6: Leaving Professional Advisors Out Until the End

This type of transaction should be designed before the application and before investor funds are committed. Lawyers, CPAs, tax advisors, securities counsel, appraisers, lenders, and Licensed Insolvency Trustees may all have important roles.

Mistake 7: Ignoring the Four-Year Holding Period

Investors should understand that the shares generally must be held for the required period. Early redemption, transfer, cancellation, or disposal may create repayment obligations.

Mistake 8: Forgetting That Investors Still Have Risk

The tax credit can improve the economics of an investment, but it does not make the investment safe. The province does not guarantee the value of the shares or the success of the business.

When Should You Call ALP Ltd.?

You should consider calling ALP Ltd. early if the proposed transaction involves:

·      Buying machinery or equipment from a distressed business.

·      Buying operating assets from a company in receivership or bankruptcy.

·      Working with a Licensed Insolvency Trustee to evaluate a possible asset sale from an insolvent company.

·      Using investor capital to acquire, repair, relocate, or upgrade equipment.

·      Preparing an SBITC investment plan involving tangible assets.

·      Seeking lender financing where equipment collateral matters.

·      Raising investor capital for a manufacturing, processing, construction, food, beverage, fabrication, printing, woodworking, agricultural, or other equipment-heavy business.

·      Needing independent support for fair market value.

The earlier the appraisal is completed, the more useful it can be. An appraisal obtained before final negotiations may help the buyer avoid overpaying. An appraisal obtained before the SBITC application may help the professional team prepare a better investment plan. An appraisal obtained before lender review may help support financing discussions.

How ALP Ltd. Helps

ALP Ltd. provides independent machinery and equipment appraisal services for business owners, buyers, lenders, lawyers, accountants, investors, Licensed Insolvency Trustees, receivers, and secured creditors.

In a distressed asset purchase connected to a possible NB SBITC financing structure, ALP Ltd. can help by:

·      Reviewing the equipment list.

·      Surveying machinery, equipment, and fixtures.

·      Identifying major assets and value drivers.

·      Researching market value.

·      Preparing an independent appraisal report.

·      Helping the buyer and professional advisors understand the value of tangible operating assets.

·      Providing documentation that may support fair market value in the transaction file.

ALP Ltd.'s role is valuation. Your lawyer, CPA, tax advisor, securities counsel, and Licensed Insolvency Trustee should advise on program eligibility, transaction structure, investor documentation, tax consequences, insolvency process issues, and legal compliance.

Who Else Should Be Involved?

New Brunswick Business Lawyer

Structures the acquisition, reviews program restrictions, drafts asset purchase agreements, reviews corporate records, and coordinates closing.

Tax Advisor

Advises the buyer and investors on tax consequences, credit timing, non-refundable credit limitations, and related tax issues.

CPA

Prepares or reviews financial statements, projections, working capital plans, and purchase price allocation.

Securities Lawyer

Advises on the issuance of shares, investor documents, exemptions, disclosure, and compliance with securities rules.

Licensed Insolvency Trustee

If the seller is insolvent, the LIT can review the situation, explain insolvency options, and, where appropriate, administer or assist with a formal insolvency process. This may be especially important where the buyer and seller have found each other before bankruptcy or receivership and want to understand whether a legal insolvency process is required or appropriate.

Equipment Appraiser

ALP Ltd. provides independent valuation support for machinery, equipment, fixtures, and tangible operating assets.

Lender

A lender may provide working capital, equipment financing, or operating credit alongside investor equity.

Insurance Advisor

Ensures the acquired assets and new operations are properly insured from closing onward.

Is This Strategy Right for Every Distressed Business Purchase?

No.

The NB SBITC Program may be useful in some distressed asset acquisition structures, but it is not suitable for every deal.

It may be a better fit where:

·      The buyer will operate an active business in New Brunswick.

·      The investor group is eligible.

·      The corporation can issue eligible shares.

·      The use of proceeds clearly benefits New Brunswick operations.

·      The seller is in receivership or bankruptcy, if the asset-purchase exception is being relied upon.

·      The seller is already insolvent and a Licensed Insolvency Trustee and legal counsel determine that a formal process is appropriate.

·      The assets are being purchased at supportable fair market value.

·      The investors understand the risks and holding period.

·      The professional team is involved before the application is submitted.

It may be a poor fit where:

·      The buyer simply wants to buy existing shares from the owner.

·      The seller is distressed but not in receivership or bankruptcy, and no LIT or legal review supports a formal insolvency process.

·      The transaction is mainly designed to get the tax credit.

·      The use of funds is unclear.

·      The asset values are unsupported.

·      Investors need liquidity before the required holding period.

·      The business cannot meet the program's eligibility and ongoing compliance requirements.

Start With a Feasibility Review

Before attempting to use the NB Small Business Investor Tax Credit Program to buy assets from a distressed small business, start with a feasibility review.

A practical first review should answer these questions:

1.      What assets are being purchased?

2.      Who legally owns and controls those assets?

3.      Is the seller merely distressed, or is it legally insolvent?

4.      Is the seller already in receivership or bankruptcy?

5.      If not, has a Licensed Insolvency Trustee reviewed whether a formal insolvency process is appropriate?

6.      Who are the proposed investors?

7.      Are the investors eligible?

8.      What corporation will issue the shares?

9.      Does that corporation satisfy the program requirements?

10.  How will the raised capital be used?

11.  Does the proposed use of funds comply with the program restrictions?

12.  What is the fair market value of the equipment and tangible assets?

13.  What professional reports and documents are needed before applying?

14.  What are the closing deadlines and compliance obligations?

ALP Ltd. can assist with the equipment and tangible asset valuation portion of this review.

Talk to ALP Ltd. About Equipment Appraisal for a Distressed Asset Purchase

If you are considering the purchase of machinery, equipment, fixtures, or operating assets from a distressed New Brunswick business, ALP Ltd. can help you understand the value of the tangible assets before you proceed.

An independent equipment appraisal can help support negotiations, investor due diligence, lender discussions, Licensed Insolvency Trustee review, purchase price allocation, and fair market value documentation.

Contact ALP Ltd. before you finalize the price, submit the investment plan, or close the transaction.

The right appraisal at the right time can help buyers, investors, lenders, lawyers, accountants, Licensed Insolvency Trustees, and other advisors make better decisions.