Rehiring a Receivership Team Without Inheriting Its Debts

The situation

Marco worked as an insurance adjuster and Huong managed an office; neither had run a business before. When a court-appointed receiver put a Milton HVAC and refrigeration service company up for sale after its owner became insolvent, the couple saw an opportunity. The company had a loyal commercial client base and a stable crew of fourteen technicians and office staff who had kept the business running through the owner's financial troubles. Marco and Huong agreed to buy the company's assets for roughly $980,000, financed partly through savings and partly through a loan secured against the equipment and service contracts they were acquiring.

The receiver was selling assets, not shares, and was selling them free of most of the prior company's debts. That structure protected Marco and Huong from the business's old creditors, but it raised a separate question they had not anticipated: what happened to the employees. The crew was the reason the business had any value left to buy. Marco and Huong wanted to keep as many of them as possible, starting the Monday after closing, with as little disruption to ongoing service calls as they could manage.

The legal problem

Under the Employment Standards Act, 2000, when a business is sold as a going concern, employees who continue working for the new owner are usually treated as having unbroken service — their years with the old employer count toward vacation, notice, and severance entitlements owed by the new one. That rule exists to stop employers from erasing seniority by selling the business to themselves through a shell transaction. But the Act treats a sale by a receiver differently: a receivership sale is not automatically deemed a continuation of employment in the same way. That distinction matters enormously, and it is easy for a first-time buyer to miss entirely.

Left unmanaged, the transition carried two separate risks. First, if Marco and Huong simply told the existing staff to keep showing up for work under the new ownership, a court could later find they had effectively continued the employment relationship regardless of the receivership, exposing them to claims for years of accrued vacation pay, notice periods, and severance calculated on service dating back well before they owned the business. Second, the crew itself was owed real money by the failed company — several employees had unpaid wages and vacation pay outstanding at the time of the receivership, totalling roughly $60,000 across the group. That debt belonged to the old employer's estate, not to Marco and Huong, but the employees understandably did not distinguish between the business they had worked for last week and the one signing their paycheques next week.

One employee in particular, Minh, had been the company's service manager for fourteen years and was central to keeping commercial clients from bolting during the sale process. Minh wanted assurance that fourteen years of loyalty would not simply vanish because of the receivership, and made that a condition of staying on.

What we did

1. Confirmed the receivership sale structure before closing. We reviewed the asset purchase agreement and the receiver's court-approved sale process to confirm the transaction was structured as a genuine receivership sale, which affects how continuity of employment is treated under the Employment Standards Act. This was the foundation for everything that followed — if the structure had instead looked like an ordinary business sale, the standard continuity rules would have applied automatically.
2. Treated every rehire as a new job offer, not a transfer. Rather than simply keeping staff in place, we had Marco and Huong issue fresh written offers of employment to each person they wanted to keep, with new start dates, new terms, and no reference to the prior employer's tenure as a condition of the offer. Each employee's old job legally ended with the receivership; each new job began, on paper and in practice, on the day Marco and Huong took over.
3. Separated wage claims from the new employment relationship. We explained to Marco and Huong, and helped them explain to staff, that unpaid wages and vacation pay owed by the failed company were claims against the receivership estate, not obligations Marco and Huong were taking on. We pointed departing and continuing employees alike toward the receivership claims process for those amounts rather than letting the new owners absorb debts that were never priced into the $980,000 purchase.
4. Negotiated directly on Minh's tenure. Because losing Minh risked losing several of the company's largest commercial accounts, Marco and Huong were willing to compromise. We negotiated a written agreement recognizing Minh's fourteen years of prior service for the specific purpose of future vacation accrual and eligibility for a benefits waiting period, while being explicit that no past service would count toward severance or termination entitlements if the new employment ever ended. That distinction — recognizing tenure for some purposes but not others — let both sides get something real without exposing Marco and Huong to the full liability of fourteen years of deemed employment.
5. Advised on which roles not to fill. Of the fourteen employees, Marco and Huong's own review of the business's workload supported keeping ten. We confirmed that declining to rehire the other four created no liability for Marco and Huong specifically because those employees' jobs had ended with the receivership sale, not with a decision made by the new owners — those employees' claims, including any notice or severance owed, ran against the former employer's estate.
6. Documented independent advice for the rehired staff. To make the new offer letters and the limited service-recognition terms enforceable, we recommended each rehired employee, including Minh, have the chance to review the terms with their own advisor before signing, and built in a short window to do so. An employee who signs away rights without that opportunity can sometimes challenge the agreement later.

The outcome

Ten of the fourteen employees accepted new offers and started with Marco and Huong the week after closing, keeping service calls running with almost no gap for existing customers. Minh stayed on under the negotiated compromise — past service counted for vacation purposes going forward, but not for severance — and remained the point of contact for the accounts that mattered most to the business's early survival. The four employees who were not rehired filed claims against the receivership estate for their outstanding wages, vacation pay, and statutory entitlements; Marco and Huong had no obligation to those claims and none was made against them.

It was not a clean sweep. Marco and Huong would have preferred to keep the full team, and two of the four who left took jobs with a competitor within weeks, taking some institutional knowledge with them. Minh, for their part, had wanted full recognition of fourteen years for every purpose, including severance, and settled for less than that. But six months in, the business was stable, the technicians who mattered most to its client relationships had stayed, and Marco and Huong had not inherited a wage bill or a severance exposure that was never reflected in what they paid for the company. Both sides got a result they could live with, which is often the realistic measure of success in a receivership transition rather than a clean win for either party.

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