Can a buyer insist on regulatory approval before closing?

A buyer can ask that closing wait for a regulator’s approval, and for some businesses the law gives the buyer a reason to ask. The sections below give three examples of approvals that can sit between signing and closing. They are examples, not a checklist, and your business may need none of them or others not listed here.

Competition filings for larger transactions

The Competition Bureau explains that the Competition Act requires parties to certain proposed mergers to notify the Bureau before closing, and that the parties are then prohibited from completing the merger during a waiting period unless the Bureau waives it. Whether a deal is notifiable depends on financial thresholds, other criteria and exceptions set out in the Act. Section 123 says a proposed transaction referred to in section 114 shall not be completed before the end of the periods it sets, unless the Commissioner notifies the parties before then that the Commissioner does not, at that time, intend to make an application under section 92. The Bureau encourages parties who may need to notify to seek legal advice.

Foreign buyers and the Investment Canada Act

If the buyer is a non-Canadian, the Investment Canada Act may apply. Section 12, in the version currently in force, requires the non-Canadian to give notice of an investment subject to notification at any time before implementation or within thirty days after. Section 16 says a non-Canadian shall not implement an investment reviewable under that Part unless it has been reviewed and the Minister is satisfied, or deemed satisfied, that it is likely to be of net benefit to Canada. Subject to the exceptions in subsection 16(2), a reviewable investment therefore has to wait for that decision.

Licences that follow the business

Some licences do not move on their own. Nova Scotia’s government says a business that buys a licensed establishment needs to apply for approval to transfer the existing permanent liquor licence to its name, and that club liquor licences are not transferrable. Other provinces and other licence types have their own rules, so ask which of your permits move with the sale, which need approval and which the buyer must apply for afresh.

What this means for a seller

If an approval is a condition, ask who applies, who pays, how long the agreement allows and what happens if the regulator says no or does not answer in time. Where the law requires the approval, the condition is not a bargaining chip. See what happens between the LOI and closing for where it fits in the timeline.