Overvaluation
Overvaluation means assigning an asset or business a value higher than its fair market value. It is a business and finance term rather than a legal one, but it has legal consequences in transactions, financing, insurance claims and tax filings.
How BC law treats it
In a business sale, buyers usually protect against overvaluation through due diligence and the seller's representations and warranties, including on financial statements. For tax purposes, transfers between related parties at more than fair market value can trigger adjustments under the Income Tax Act.
What it means for your business
Base purchase prices on proper due diligence and, where appropriate, an independent valuation.
Risks and common mistakes
A buyer that relies on unverified financial information may overpay with no remedy if the purchase agreement lacks adequate warranties.
Fulcrum's mergers and acquisitions lawyers can help with these issues.
General information about British Columbia and Canadian law, current to October 2026. It is not legal advice.
