Does a controlled goods registration transfer when you buy a business?

Section 8 of the Controlled Goods Regulations says the registration of a person is not assignable, and Public Services and Procurement Canada (PSPC) says registration of individuals or businesses in the program is not transferrable. Because of that wording, do not assume a purchase passes the seller’s registration to you; confirm it with the program.

Why registration matters

Under section 37 of the Defence Production Act, no person may knowingly examine or possess a controlled good, or transfer one to another person, unless registered or exempt from registration. The Minister may register an applicant and may deny, suspend, amend or revoke a registration on the basis of a security assessment. Under section 5 of the regulations the certificate of registration sets out the period for which the registration is valid, and under section 7 that period cannot exceed five years from the date of approval.

What must be reported when ownership changes

Under section 9 of the regulations, a registered person must advise the Minister of any change in the application information within ten business days after becoming aware of it. For an acquisition, it must give the Minister the name and address of any person who will, as a result of the acquisition, own the share of the voting shares or interests that section 9(2) describes, by the later of 32 business days before the date of the acquisition or one business day after becoming aware of it. PSPC lists changes to officers, directors, the authorized individual and designated officials as examples of reportable changes.

What to ask the program

Ask the Controlled Goods Program, in writing and before signing, whether the way the deal is structured, such as a share sale or an asset sale, leaves an existing registration in place or requires a new application. Also ask your lawyer how the reporting periods affect the closing date, and see what licences and permits transfer when you buy a business and the Controlled Goods Program registration glossary entry.