Bulk Sales Act and Asset Purchases in Ontario: What Buyers Must Do

If you are buying the assets of an Ontario business, you may have heard that a "bulk sales" process protects you from the seller's creditors. That used to be a statutory step. Many older checklists and online articles still describe it, which makes it easy to wonder whether you have missed something.

The short answer is that the old Act is gone, but the risks it addressed have not disappeared. Several separate tax and workplace-insurance rules can still reach a buyer, and each has its own certificate, election or timeline. This article walks through what replaced the old process and what to line up before closing.

Is the Bulk Sales Act still in force?

No. Ontario's Bulk Sales Act was repealed on March 22, 2017, by Schedule 3 of the Burden Reduction Act, 2017. It no longer requires bulk sale affidavits, notices to creditors or court orders.

That does not mean an asset purchase is risk-free. With the Act gone, a buyer relies on other statutory certificates, tax elections, searches and the contract itself. Practical risks such as registered security interests, or a seller who sells assets to avoid paying creditors, are real, and a lawyer can advise on how they apply to your deal.

Retail Sales Tax clearance

Ontario's Retail Sales Tax Act still has a clearance process. A seller of a business or its assets, in whole or in part, must obtain a Clearance Certificate, or an equivalent Certificate Letter, from the Ministry of Finance. The clearance deals with the seller's retail sales tax history.

For you as buyer, this matters because a buyer who does not obtain the seller's clearance certificate or certificate letter may be held liable for the seller's unpaid RST at the time of sale. A lawyer can confirm how that risk applies to a particular business.

• Requests must be in writing at least two weeks before the sale takes place.
• If a third party applies, the seller must sign an authorization.
• If RST is owed, or an audit is scheduled but not finished before closing, the Ministry may require funds to be held back from the sale proceeds and may ask the seller to accept a written condition on the certificate.
• When the Ministry's search finds no RST history, it issues a Certification Letter as proof of due diligence.
• The Minister may withhold a certificate until certain debts under other Ontario tax statutes, such as the Fuel Tax Act and Tobacco Tax Act, are paid or secured.

Requests go to Collections Support Operations at the Ministry of Finance, by email at Collections.SupportOperation@ontario.ca or by phone at 1 866 668-8297. Because of the two-week minimum, build this step into your closing timetable early.

WSIB, Employer Health Tax and employees

WSIB has its own rule. A purchaser of all or part of a business must pay all amounts the seller owed WSIB immediately before the disposition, and WSIB can enforce this against the purchaser as if the purchaser were the employer.

A WSIB Purchase Certificate is issued only if the seller's account is in good standing, with premiums reported and all amounts owing paid. It is valid for 30 days from the issue date, it is requested before the sale closes, and the seller must notify WSIB of the disposal within 10 days.

Employer Health Tax works differently. If the seller's business closes after an asset sale, a final EHT return is due within 40 days of the closure date, and outstanding liabilities are paid with that return. In a share sale, a change in ownership is not a change in legal entity, so the EHT account stays the same and no final return is required. Whether an asset buyer needs any protection against the seller's EHT is something to confirm with a lawyer or accountant, as it depends on the facts.

Employees are a separate question. If an employee keeps working for the new owner, past service with the seller counts toward Employment Standards Act entitlements based on length of employment. That continuity does not apply if the new owner hires the employee more than 13 weeks after the earlier of the employee's last day with the seller or the day of the sale. The purchaser is not required to hire the seller's staff, and an employee may refuse the purchaser's offer and treat the sale as a termination by the seller.

HST and the section 167 election

In an asset purchase, GST/HST is often the largest cost to think about. Without any election, each property and service is treated as a separate supply, the price is reasonably allocated, and GST/HST generally applies to the taxable items. The part of the price reasonably attributed to goodwill is excluded when calculating GST/HST payable, whether or not an election is made.

If you buy a business or part of one and acquire all or substantially all of the property needed to carry it on, you and the seller can jointly elect under Excise Tax Act s. 167. The election is not available where the seller is a registrant and the buyer is not. CRA generally reads "all or substantially all" as 90% or more, with property obtained elsewhere limited to 10% or less of the fair market value of all necessary property. A "part of a business" must be a functionally and physically discrete operating unit that can operate on its own, so buying one truck does not qualify.

Once the election is made and filed, no GST/HST is payable on the supplies under the agreement. Exceptions include taxable services the seller will render, taxable leases and licences, and taxable sales of real property where the buyer is not a registrant. Real property bought separately from the other assets may fail the test, so the structure of the deal matters.

The election is made jointly on Form GST44. If the buyer is a registrant, the buyer files it with the CRA by the due date of its GST/HST return for the first reporting period in which tax would otherwise have become payable, and the CRA may allow a later date on the buyer's application. A registrant buyer is also generally treated as having acquired capital property exclusively for use in commercial activities, and later changes in use can trigger adjustments.

Comparing the main protections

Leases deserve a mention too. If a lease bars assignment without the landlord's consent, the Commercial Tenancies Act reads in a term that consent is not to be unreasonably withheld, unless the lease expressly says otherwise. If a landlord refuses or fails to consent, the tenant or proposed assignee can apply to the Superior Court of Justice. Other contracts, such as customer and supplier agreements, depend on their own wording.

What to do next

Start these steps before you sign, because several certificates take time and some cannot be obtained after closing. Your lawyer and accountant can adapt the list to the business you are buying.

• Confirm in your offer or agreement that the deal is an asset purchase and list the assets and contracts you are buying.
• Ask the seller to request the RST clearance certificate or certificate letter at least two weeks before closing.
• Ask the seller for a WSIB Purchase Certificate and note its 30-day validity.
• Decide with your accountant whether a GST/HST s. 167 election is available, and prepare Form GST44 if so.
• Run a Personal Property Security Act search and discuss contractual indemnities and holdbacks with your lawyer.
• Review the lease and any key contracts for consent requirements.
• Plan how employees will be offered work and how their prior service will be treated.
• Ask about any seller payroll, GST/HST or other tax debts that could affect you, since those depend on the facts.

Frequently asked questions