Do federal government contracts transfer when you buy a business?

If the target sells to the Government of Canada, treat those contracts as their own diligence item. Ask the seller for each contract and its amendments. This page covers federal contracts only; check provincial and municipal contracts with the body that issued them.

What the archived Supply Manual says about assignment

Chapter 8 of PSPC’s archived Supply Manual says the Standard Acquisition Clauses and Conditions general conditions require the written permission of Public Works and Government Services Canada before any contract assignment. It adds that an assignment must not relieve the original contractor of any obligations, and that the original contractor is ultimately liable for performance. Section 8.90 speaks of assignment; see novation for the different concept.

Assigning money the Crown owes

Under the Financial Administration Act, s. 67, except as provided in that Act or another Act of Parliament, a Crown debt is not assignable. Section 68 allows assignment of a Crown debt that is an amount due or becoming due under a contract, but only if the assignment is absolute, in writing and made under the assignor’s hand, does not purport to be by way of charge only, and notice is given to the Crown under s. 69. Under s. 68(4), it stays subject to all conditions and restrictions on the right of transfer that relate to the original Crown debt or are contained in the original contract. See assignment of Crown debt.

Checking the target’s standing

The Office of Supplier Integrity and Compliance replaces the previous Integrity Regime. Under the Ineligibility and Suspension Policy a supplier may be suspended or declared ineligible for contracts with the Government of Canada. The archived Supply Manual says a proposed assignee must give a signed certification, and if the assignee or its affiliates are ineligible or suspended, the contracting officer may refuse the assignment or request a Public Interest Exception by escalating to the Deputy Head or equivalent. The policy also says that if an ineligible or suspended supplier restructures or acts, on its own or with its affiliates, in such a way as to avoid the effects of the determination, the Registrar of Ineligibility and Suspension may, in the Registrar’s discretion, treat the entity, an affiliate or a successor as ineligible or suspended.

Share or asset deal

Ask your lawyer whether a share purchase or an asset purchase changes what applies to these contracts. For wider contract questions, see which third-party consents you need.