What can still go wrong on closing day when buying a business?

A certificate can lapse, an election can go unsigned and a lien can go unsearched. Each of these is paper that has its own condition or clock, and none of it moves because the parties are ready to sign. The closing-day answer covers the mechanics of the day. This page covers four gaps that can remain open.

A workers’ compensation certificate that is missing or lapsed

The WSIB says that if you buy a business’s assets in Ontario you should get a purchase certificate, and it may hold the purchaser liable for amounts the vendor owed up to the date of sale if you do not have a valid one. The request must be made before the date of sale, and a certificate is valid for 30 days from its printed issue date. The WSIB says a share sale needs no certificate, though the share purchase agreement must still be submitted to it. Alberta’s WCB says you have a responsibility to get a clearance when buying a business, its stock or equipment, and the Saskatchewan WCB asks both sides to make sure their accounts are up to date.

A GST/HST election that no one signed

Under s.167(1) of the Excise Tax Act, where the buyer acquires all or substantially all the property that can reasonably be regarded as necessary to be capable of carrying on the business or part as a business, the parties may make a joint election in the prescribed form, except where the supplier is a registrant and the recipient is not. The CRA publishes it as form GST44. Section 167(1.1) gives the election its effect where the recipient, if a registrant, files it with the Minister by the due date of the return for its first reporting period in which tax would otherwise have become payable on the supply. Ask your accountant who files it, and by when.

A security interest no one searched for

Under Ontario’s Personal Property Security Act s.43, the registrar issues, on request and payment of the fee, a certificate stating whether, at the time mentioned in it, a financing statement or financing change statement is registered against the debtor name searched. It is proof of its contents absent evidence to the contrary. Ask your lawyer to search the seller’s business name and to show how any registered security will be released from the funds. Other provinces have their own personal property security statutes.

A consent that has not arrived

A landlord’s or regulator’s consent can still be outstanding on the day. Our answer on a consent that never arrives covers what to check.