Buying an electrical contractor in Canada

An electrical contractor may not be a business a buyer can simply pay for and start operating. In Ontario, ESA says only contractors it has licensed may do electrical work for hire. So the first test is not the financial statements. It is whether you, or someone you can employ, will meet the licensing rule where the business operates. Only then does it make sense to ask what a good contractor looks like, what a seller may not mention, and how the deal should treat the things that will not transfer on their own. This guide is for someone evaluating a purchase.

Qualify yourself first

The Electrical Safety Authority (ESA) says that in Ontario a licensed electrical contractor must be a Master Electrician or have at least one Master Electrician working for it at all times. It lists further requirements, including public liability and property damage insurance at ESA’s stated minimum, registration with the Workplace Safety and Insurance Board if required, and having paid or arranged to pay certain assessed taxes. If a requirement is not met, ESA says its Director of Licensing may refuse the licence. ESA also has a separate page for out-of-province Master Electrician licences. In British Columbia, Technical Safety BC says a Field Safety Representative certified with it is named on every electrical operating permit.

What a good one looks like

Look for a business that does not depend on one person. That means a qualified person other than the owner, a crew that has stayed, and customers who deal with the company rather than with the owner personally. Ask for the split between new-build, renovation and service work, and which customers are on maintenance agreements. Our guide to what an electrical contractor is worth covers what to ask about that mix. Ask, too, whether ESA has ever taken compliance action. ESA says failure to conduct business with honesty, integrity and in accordance with the law may result in compliance action or a proposal to revoke or suspend a licence.

What the seller may not mention

Some things may not come up unless you ask. Ask whether the licensed person is leaving with the seller. Ask about failed inspections and open deficiencies, and ask for the permit history. Ask about work-site damage. In Ontario, Ontario Dig Authority says requesting a locate is free and required by law, and that responses from buried infrastructure owners form part of the locate package. If the contractor does underground service work, ask to see its locate records.

The crew and the equipment

Much of what you are buying may be its people. Ask how many of the crew hold the credentials their work requires, how long each has been with the company, and whether any have said they will leave when ownership changes. Ask for the vehicle and equipment list with ages and service records, and whether any of it is leased or financed. If the team does not stay, what you paid for may not be what you end up operating.

Workers’ compensation and contractor clearances

A business that hires a contractor can check the contractor’s workers’ compensation standing with the board. WorkplaceNL, for example, says a clearance confirms whether a contractor has its own coverage and is in good standing, and that if the contractor has its own coverage the letter clears the hiring employer of responsibility for unpaid assessments. Each province runs its own board. Ask the seller for the current clearance position on active jobs, and confirm with the board that the account is in good standing.

• Confirm who the qualified person will be after closing, and whether they are employed or contracted.
• Ask the regulator what must be filed when a licensed contractor changes hands.
• Request the permit and inspection history, including failed inspections.
• Ask for the workers’ compensation account status and any clearances on active jobs.
• List which customer contracts can be assigned and which need consent.

What will not transfer on its own

Decide with your lawyer whether you are buying shares or assets, because it changes what moves. In Ontario, the Workplace Safety and Insurance Board says that if you are purchasing a business’ assets you should get a purchase certificate, and that it may hold the purchaser liable for the vendor’s amounts owing if there is no valid certificate. It adds that a share sale creates no new legal entity, so none is required, though the Share Purchase Agreement must still be submitted. Ask the licensing body what your structure means for the licence, and ask the insurer what it needs to see before it covers you.

Financing and the next steps

BDC says a business purchase loan is intended to finance the acquisition of an existing business with revenue and an established client base. Once the licence and the people are clear, the next steps are due diligence and financing. Neither is a reason to rush the licensing question.