Does a security guard agency licence transfer when you buy a security company in Ontario?

A buyer of an Ontario security company is buying a business that can only operate while it holds a licence. Section 7(1) of the Private Security and Investigative Services Act, 2005 says no person shall sell the services of security guards, or hold themself out as available to sell them, unless the person holds the appropriate licence under the Act or is an employee of such a licensee acting on its behalf in the normal course of their duties. Section 12 of the same Act says a licence is not transferable, and section 2(7) lists persons the Act does not apply to, such as locksmiths and armoured vehicle services. The Ontario government states that any business selling guard or private investigator services requires an agency licence. So the licence cannot be transferred to a buyer as one of the business’s assets.

What the Act says when the people behind the licence change

Section 8(1) of the Private Security and Investigative Services Act, 2005 says that, subject to subsection (2), if there is a change in the officers, directors or partners of a business entity that is a licensee, the business entity shall not continue to act or offer services under the licence. Section 8(2) of the same Act lets the Registrar consent, in writing, to the entity continuing to act or offer services under the existing licence, in which case subsection (1) does not apply. If a share purchase will put new officers, directors or partners in place, ask whether that consent is needed and how it will be obtained before closing.

Insurance and the guards themselves

Section 30 of the Private Security and Investigative Services Act, 2005 says no person shall hold a licence to engage in the business of selling the services of private investigators or security guards unless that person is insured by an insurer licensed under the Insurance Act for the kinds of liability and in the amounts prescribed. Ask whether the licence holder’s insurance after closing meets that requirement. Section 31 of the same Act says no business entity shall employ a private investigator or a security guard unless the private investigator or the security guard has an appropriate licence. The Ontario government also says new guards must complete basic training and pass the required test before applying for a licence, so check that each guard’s licence is current.

Questions to put to the seller and the regulator

• Which legal entity holds the agency licence, and is the deal a purchase of that entity or of its assets?
• Will any officer, director or partner change, and has the Registrar been asked for written consent?
• Does the buyer need its own licence, and can it hold it before closing?
• Does the buyer’s insurance meet the prescribed requirement?

The related entry security guard agency licence defines the term; this page covers only Ontario’s rule on a purchase.