How to Transfer a Municipal Business Licence in Calgary or Edmonton in Alberta

If you are buying a business in Calgary or Edmonton, the licence that lets it operate is easy to overlook. The seller may hold a municipal business licence, so it is worth checking whether it passes to you, and you should not assume that it does.

This article explains the questions to ask, how the structure of your purchase can change the answer, and what to do before closing so you are not left unable to open. The specific licence rules, forms, fees and timing are set by each city, so confirm the details with the City of Calgary or the City of Edmonton, and with a lawyer, before relying on this overview.

This article covers the law of Alberta.

Why a licence may not simply transfer

Whether a municipal business licence can be taken over by a new owner depends on the city's own rules and the type of business, so it is worth confirming with the city. When the owner changes, the city may treat the new owner as needing its own licence, or it may have a process for changing the name on an existing one. Which applies depends on the city's rules and the type of business.

Some businesses also need approvals beyond the city licence, such as those tied to the type of activity or to the premises. These vary widely, so ask what applies to your kind of business.

How your deal structure matters

In an asset purchase, you buy the business assets, and you will usually be the new operator. That often raises the question of whether you need to apply in your own name. In a share purchase, the company that holds the licence stays the same, but the owners change. Even then, the city may need to be told about changes, so ask.

Structure also affects tax and financing. The Excise Tax Act s.167 business-assets rule applies where a supplier 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. Without an election, each property and service is treated as a separate supply, so GST (5% in Alberta) can apply to the taxable parts, and Alberta has no provincial sales tax.

A joint election by the seller and the buyer, made on CRA form GST44, can mean no tax is payable on the supplies under the agreement. The election is not available where the supplier is a registrant and the recipient is not. Even with a valid election, tax is still payable on a taxable service the supplier will render, on a taxable lease, licence or similar supply of property, and, where the buyer is not a registrant, on a taxable sale of real property. 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. An accountant or lawyer can confirm how this applies to your deal.

If you are planning to use the Canada Small Business Financing Program, note that it does not finance share purchases or assets acquired by a holding company, so a share purchase of an Alberta company cannot be funded this way.

Your lawyer can write the purchase agreement so that the licence position is clear, including who is responsible for applications and what happens if the licence is delayed.

Calgary and Edmonton: what to confirm with each city

Rather than assume Calgary and Edmonton work the same way, ask each of them the same set of questions.

• Can the existing licence be transferred or changed to my name, or do I need a new application?
• What documents and information do you need from me and from the seller?
• How long does it usually take to issue the licence?
• Are there inspections or other approvals tied to the premises or the type of business?
• Can I operate while my application is being processed, or must I wait for the licence?
• Are there fees, and who is expected to pay them?

Write down the answers and who gave them, and keep copies of what you submit. If timing is uncertain, ask your lawyer about adding a condition to the purchase agreement that closing depends on the licence being in place.

What if you operate before the licence is issued?

What happens if you operate without a required licence depends on the city and the circumstances, so it is worth confirming with the city and a lawyer before you open. Do not rely on the seller's licence, or on an informal assurance, unless the city has confirmed in writing that you may operate.

Searches that help before you buy

Alberta Corporate Registry searches are requested through a registry agent. Options include a certified current search, a certified historical search and a certificate of status. These searches can show the registration date, owners, directors and legal addresses, and cover Alberta and extra-provincial corporations, partnerships, trade names and incorporated non-profits. The agent charges a government fee plus a service fee.

If the business trades under a name, a search can help confirm who is registered for it. Certificates of status are not available for trade names and partnerships.

A Personal Property Registry search can also help you see whether anyone has registered an interest against the seller. Search types include business debtor name, serial number and registration number, each requested on a Search Request form at any registry agent office in Alberta. A search returns one of four outcomes: exact match, inexact match, no match, or both exact and inexact matches. For an inexact match, you may need to search the name again or search the specific registration number, and questions about a result go to the party that registered the interest.

What to do next

Contact the licensing office in the relevant city before you sign, ask the questions above, and have the answers reflected in the purchase agreement. Check the trade name and ownership through a registry agent, and speak with a lawyer about how to protect yourself if the licence is not ready by closing.

Frequently asked questions