Are You Liable for the Seller's WSIB Debts When Buying an Ontario Business?
It depends on whether you buy assets or shares. In an asset purchase, yes: under the Workplace Safety and Insurance Act, s. 146(1), a person who acquires all or part of an employer's business is liable for what the employer owed just before the disposition. In a share acquisition, the acquirer takes on the seller's liabilities by law.
A WSIB purchase certificate can protect you in an asset purchase. The WSIB issues one on request if the seller's account is in good standing, and it waives your liability. It is valid for 30 days, and each account needs its own. The WSIB will not process a request while the seller's account has an issue under appeal. No certificate is issued for share acquisitions where no assets are disposed of, or for amalgamations.
Some liabilities also stay inside the company in a share deal. Directors when a corporation fails to remit payroll deductions are liable with it, unless they exercised the care a reasonably prudent person would have used to prevent the failure. Because the certificate lasts 30 days and the disposal date is the date of possession, plan the request around closing and confirm details with a lawyer.
Key takeaways
- In an asset purchase, the Workplace Safety and Insurance Act, s. 146(1) makes you liable for what the employer owed just before the disposition.
- A WSIB purchase certificate waives that liability, but only if the seller's account is in good standing, and it is valid for 30 days with a separate certificate for each account.
- The WSIB does not issue purchase certificates for share acquisitions where no assets are disposed of, or for amalgamations, and it will not process a request while the seller's account has an issue under appeal.
- Directors' liability for unremitted payroll deductions stays with the corporation in a share purchase, and CRA cannot start an action more than two years after someone last ceased to be a director.