What if due diligence shows a business licence has lapsed?

A lapsed licence can mean several different things: a renewal missed by a few weeks, a permit the business never held, or a licence held by someone other than the company you are buying. Work out which one you have before you decide what to do about it. Ask the seller for the licence, the last renewal notice and any letters from the issuing office. Then call that office yourself. Do not rely on the seller’s account of what the office said.

Why it matters

Municipal licensing rules differ, and so do the consequences of a lapse. The City of Winnipeg’s page says a person who carries on a business listed in its Community Safety Business Licensing By-law without a valid and subsisting licence is guilty of an offence. The City of London says the holder is responsible for renewing annually before the March 31 expiry, whether or not a renewal notice arrives. Those are two cities’ rules, not a national rule. Look up the by-law for the municipality where the business operates.

Ask the issuing office what fixing it involves

Ask whether the licence can be reinstated or whether a new application is needed, who must make it, what inspections or documents it requires and how long it takes. Ask too whether a lapse affects a transfer. For one kind of licence, British Columbia’s Liquor and Cannabis Regulation Branch says a liquor licence transfer is not eligible if the licence has expired. If you are unsure which permits apply, BizPaL is a search tool, provided by the federal, provincial/territorial and municipal governments, for the permits and licences a business may need.

Ask your lawyer about closing conditions

The City of Abbotsford says all its business licences are non-transferable and that if business ownership has changed, a new business application must be made. Ask your lawyer whether the purchase agreement should make a current licence, or the issuing office’s written approval, a condition of closing, and who bears the cost and risk of fixing it. Work out the timing before you waive anything. Read what licences and permits transfer and what to do when you find a problem in due diligence alongside this page.