Why Government Licences and Permits Usually Don't Transfer in an Ontario Asset Sale

Buyers sometimes assume that once they've purchased a business's assets, everything the business needs to legally operate — including its licences and permits — comes along automatically. In an asset sale, that's usually not the case. Most municipal, provincial, and industry-specific licences are issued to a particular legal person or entity, not to the equipment, inventory, or premises the licence happens to relate to. A buyer who doesn't plan for this can end up owning a fully equipped business it isn't yet legally permitted to run.

This article explains why licences generally stay behind in an asset sale, how that compares to a share sale, and what buyers should do about it before closing.

Why This Catches Buyers by Surprise

An asset purchase feels, in practice, like buying "the business" — the equipment, the lease, the goodwill, sometimes even the name over the door. But legally, the buyer is a different entity from the seller, and most licensing regimes are built around who holds the licence, not what assets they happen to operate. The licence was issued to the seller's corporation, or the seller personally, and an asset transfer doesn't change who that licence-holder is.

Share Sale vs. Asset Sale: The Key Difference

Kinds of Licences and Permits That Are Commonly Affected

• Municipal business licences
• Health, safety, and food-service permits
• Liquor licences
• Professional or trade certifications tied to a specific operator
• Environmental approvals and industry-specific regulatory permits

The exact requirements vary enormously by industry and municipality, and this list is illustrative rather than exhaustive — always check directly with the relevant licensing authority for the business in question.

Why the Underlying Assets Don't Carry the Licence With Them

A licence is a form of regulatory permission, not property that transfers the way equipment or inventory does. Even where a business's contracts and physical assets move cleanly to a buyer through a properly drafted asset purchase agreement, the licensing body's own rules — not the purchase agreement — control whether and how the licence itself can continue, transfer, or needs to be reissued.

Planning Ahead: A Buyer's Checklist

• [ ] Identify every licence and permit the business currently operates under, not just the obvious ones
• [ ] Contact each relevant licensing or regulatory body early to understand its own transfer or reapplication process
• [ ] Ask specifically whether there's a gap-risk period between the seller's licence ending and the buyer's being issued
• [ ] Build licence reapplication timing into the closing conditions and the closing date itself
• [ ] Discuss with the seller whether it needs to keep operating under its own licence for a short transition period

When a Share Sale Might Avoid This Entirely

Because the corporation itself doesn't change in a share purchase, licences held by that corporation typically continue without needing reapplication — this is one practical reason some buyers and sellers lean toward a share structure for a heavily licensed business. It isn't automatic in every case, though; some licences still require notice, or even approval, where there's a change in who ultimately controls the corporation.

Frequently asked questions