Do You Need a WSIB Purchase Certificate When Buying an Ontario Business?

If you are buying an Ontario business, most of your attention goes to price, assets and the lease. One risk that is easy to miss is what the seller owes to the Workplace Safety and Insurance Board (WSIB). If the seller falls behind on premiums, the debt can follow the business to you.

A WSIB purchase certificate is the usual tool for dealing with that risk in an asset deal. This article explains what it does, who can ask for it, the timing rules, the deals where none is issued, and how it fits with the rest of your closing checklist.

Why a buyer can inherit the seller's WSIB debt

Under the Workplace Safety and Insurance Act, 1997, s. 146(1), a person who acquires all or part of an employer's business is liable for all amounts the employer owed under the Act immediately before the disposition. In plain words, the seller's unpaid WSIB amounts can become your problem on closing.

This matters because the amounts may not show up in the price negotiations or in the seller's financial statements. A buyer who does nothing is relying on the seller's account being clean. A purchase certificate lets you replace that assumption with something in writing.

What a purchase certificate does and who can ask for it

A WSIB purchase certificate waives WSIB's right to hold the buyer liable for the seller's amounts owing up to the date of disposal. It is the main protection a buyer has against this particular liability.

• Either the seller or the buyer can request the certificate, but the seller must authorize release of its account information.
• The seller's account must be in good standing before a certificate will be issued.
• A separate certificate is needed for each WSIB account.
• The certificate is valid for 30 days from issue, and the sale must close within that time.

The seller's authorization is not a formality. WSIB holds the account information, and without the seller's consent it cannot release it to you. If the seller is slow to cooperate, build that into your timeline early rather than at the last minute.

The 30-day window is the part that catches people. If closing slips past it, the certificate no longer protects you, and you would need to deal with a new request. Many buyers therefore time the request so that closing falls comfortably inside the 30 days, while allowing for the usual delays in a deal.

When WSIB does not issue a certificate

WSIB does not issue purchase certificates for several kinds of transactions. That does not mean there is no WSIB risk. It means the protection has to come from somewhere else.

The share purchase point is the one buyers most often misunderstand. When you buy shares, the company itself does not change, so its WSIB history stays with it. You cannot use a certificate to cut that history off. Instead, you would typically look at the company's account through due diligence and protect yourself in the purchase agreement.

Buying only part of a business

If you buy only part of a business, you are liable to WSIB only for the amounts relating to the part you acquired. That is a narrower exposure than buying the whole business, but the amount still has to be worked out.

To keep control of that number, you need to describe the assets you acquired and prove their value relative to the whole business. If you do not, WSIB will estimate the share and charge a pro-rated amount. An estimate made without your input may be higher than the figure you would have supported with documents.

• List the assets, contracts and operations you are acquiring.
• Gather valuations, appraisals or financial statements that show their value.
• Compare that value with the whole business so the proportion is clear.
• Keep the schedule of purchased assets consistent with your purchase agreement.

Where the certificate fits in your closing checklist

A purchase certificate deals with one liability. It does not replace the rest of your due diligence. Buyers commonly combine several protections, such as searches against the seller, a holdback of part of the price, and an indemnity from the seller in the purchase agreement. The size and form of a holdback or indemnity is negotiated between the parties.

Before you rely on this process, confirm the current version of WSIB Operational Policy 14-02-03 on purchase certificates. Policies can be revised, and how it applies depends on your situation, so it is worth confirming with a lawyer.

• Decide early whether you are buying assets or shares, since that decides whether a certificate is available.
• Ask the seller to authorize WSIB to release its account information.
• Confirm the seller's account is in good standing and identify every WSIB account.
• Request a certificate for each account and note the issue date.
• Schedule closing inside the 30-day validity period.
• If you are buying only part of the business, prepare documents that show the value of what you are buying.
• Have your lawyer reflect any remaining risk in a holdback or indemnity.

Frequently asked questions