Do Business Licences Transfer to a New Owner in Alberta?

You are about to close on an Alberta business, and you want to open the doors on day one without a licensing problem. The seller has been operating smoothly, so it is easy to assume the permits simply come along with the keys. Often they do not.

There is no single rule that covers every licence. Some can be assigned, some must be re-issued in your name, and some depend on whether you buy the assets or the company. This article helps you sort them into groups and ask the right questions early.

This article covers the law of Alberta.

Why the answer depends on the deal structure

In an asset purchase, you buy the property of the business, such as equipment, inventory, the lease and goodwill. In a share purchase, you buy the company itself, and the company keeps holding whatever it already holds. That difference often changes which licences need attention.

For tax purposes, the business-assets rules apply where a seller sells a business or part of one and the buyer gets all or substantially all of the property that can reasonably be regarded as necessary to carry on that business. Licences are not the same as tax rules, but the same question sits behind both: what exactly are you getting, and what is the seller keeping?

Whether a licence stays with the company, moves to you or has to be re-issued depends on the licence and on the body that issued it, so ask each one before closing. How the structure of your deal affects each licence is worth confirming with the issuer and with a lawyer.

Sort the licences into groups

Start by asking the seller for a list of every licence, permit, registration and account the business uses. Then group them by who issued them.

• Municipal business licences, which are issued by the city, town or county where the business operates and are often tied to a location.
• Trade, professional or industry permits, which may be tied to a person with particular qualifications rather than to the business.
• Regulated activity approvals, such as those for food, alcohol, safety or environmental matters. How a change of owner is handled depends on the approval, so it is worth confirming with the issuing body and a lawyer.
• Tax accounts, such as GST registration, which are separate from any licence and have their own rules.
• Contract-based rights, such as software licences, franchise rights or supplier agreements, which depend on what the contract says and whether the other party must consent.

For each item, write down the issuer, the holder, the expiry date and whether the issuer treats a sale as a transfer, a new application or neither. If the answer is unclear, ask the issuer in writing.

Do not forget your GST position

Your GST status is not a licence, but it affects how the sale is priced and closed. Without an election, each property and service in a business sale is treated as a separate supply, and GST at 5% in Alberta can apply to the taxable parts; Alberta has no provincial sales tax.

The going-concern exemption works through a joint election by the seller and the buyer, made in the prescribed form. The CRA form is GST44, titled GST/HST Election Concerning the Acquisition of a Business or Part of a Business. The election is not available where the seller is a registrant and the buyer is not. If the buyer is a registrant, it must file the election with the Minister by the filing deadline for its first reporting period in which tax would otherwise have become payable, although the Minister may accept a later date on the buyer's application.

Even with a valid election, tax is still payable on a taxable service the seller will render, on a taxable lease or licence of property, and, where the buyer is not a registrant, on a taxable sale of real property. Your accountant can confirm how this applies to your deal.

Confirm who holds the name and what is registered against the assets

Alberta Corporate Registry searches are requested through a registry agent, and the options include a certified current search, a certified historical search, a certificate of status and certified copies of information. These searches can show the registration date, owners, directors and legal addresses, and they cover corporations, partnerships, trade names and incorporated non-profits. Certificates of status are not available for trade names and partnerships.

A Personal Property Registry search can be done by business debtor name, individual debtor name or serial number for vehicles, trailers, aircraft, boats and similar items. A result may be an exact match, an inexact match, no match, or both exact and inexact matches. For an inexact match, you may need to search the inexact name again or search the specific registration number, and questions about a result go to the party that registered the interest. What a result means for the assets you are buying is worth confirming with a lawyer. These searches do not tell you about licences, but they help you see the fuller picture before closing.

What to do next

• Ask the seller for a full list of licences, permits and accounts, with issuers and expiry dates.
• Contact each issuer and ask in writing how a change of owner is handled.
• Run Corporate Registry and Personal Property Registry searches through a registry agent.
• Ask your accountant whether the GST election suits your deal, and confirm your registration status.
• Ask your lawyer to make key licences or approvals a condition of closing, and to set out who pays for delays.
• Plan a fallback if a licence will not be in place on closing day.

A lawyer can review the purchase agreement and tell you which approvals should be conditions of the deal. The right answer depends on the business and the licences involved.

Frequently asked questions