Fuel delivery company due diligence

You have signed a letter of intent and now the work is to find out whether the business is what it was described to be. This guide is a working list for a heating oil or propane delivery company in Ontario, organised by where the proof comes from: public registries first, then the regulator, then the ground itself. Where a finding is serious, the guide says what it may mean. It does not tell you whether to proceed; that decision belongs to you and your advisers once the documents are in front of you.

Registry searches come first

Start with the public record. The Ontario Business Registry lets anyone search for free to get basic information about a business, with more detailed search products available to order. Confirm that the seller’s legal name, corporate status and registered address match the purchase agreement. Then run a lien search. Ontario says its Personal Property Security Registration system lets you find out whether a lien has been filed, through Access Now. Search the corporation’s name and any trade names it has used, and keep the results for your lender and your lawyer.

Read what the liens are attached to

A registration against the company is not automatically a problem, but each one needs an explanation. Ask which assets it covers, whether the debt is still owing and how it will be discharged on closing. Ask in particular whether trucks, delivery equipment or inventory are covered. Under the Personal Property Security Act, a security interest in an account or inventory and its proceeds is subordinate to the interest of a beneficiary of a deemed trust arising under the Employment Standards Act, 2000, the Pension Benefits Act or the Pooled Registered Pension Plans Act, 2015 (s.30(7)), except that s.30(8) excludes a perfected purchase-money security interest in inventory or its proceeds, so ask your lawyer whether any unpaid obligations of that kind exist.

Tank and licence records

Match the company’s tank list to what TSSA has on record. TSSA says an approved underground tank receives a registration number once its application is approved. Ask for those numbers and for any inspection and removal records. Check that every contractor who works on the company’s fuel oil equipment is registered with TSSA, as the regulator says they must be. Then ask for the licence itself: TSSA says the holder must post it at the location for which it is issued, and that it is valid for 12 months, so confirm the renewal date.

The depot and the customer sites

Ask for environmental reports on the depot, including any assessment done on a tank removal or site closure. TSSA says an Environmental Assessment Report is required in that situation. Because a small leak from a buried tank can go undetected for years, according to TSSA, consider commissioning your own assessment from a qualified consultant instead of relying only on the seller’s paperwork. For customer-site tanks, sample the sites by age and type of tank and ask what the company’s records say about leaks, repairs and any past spill reports.

Findings that can end a deal

Some findings may change the deal outright. Contamination at the depot may be one, because after a spill that causes or is likely to cause an adverse effect, Ontario’s Environmental Protection Act puts duties on the owner of a pollutant and the person having control of it, and extends Part X references to a successor or assignee, other than in section 92. An open TSSA order, or an audit finding the company has not resolved, is another. So is a licence that cannot be re-established in your name. Weigh each against your own plans with advisers; some can be priced or held back, while others may mean walking away.

Organise the review so nothing falls between advisers

Fuel delivery diligence touches several specialists, and the risk is that each assumes another has covered a point. Give your lawyer the registry and lien results, the licensing and corporate records, and the agreements. Give an environmental professional the depot and tank files. Give your accountant the delivery and earnings data. Then hold a joint review before closing, where each adviser states what they checked and what they did not. Keep a written list of open items, with an owner and a deadline for each, and treat any item still open at closing as a negotiating point, not a detail.

Corporate and contract records

Alongside the registry and regulator work, collect the corporate minute book, shareholder agreements, supplier contracts with the company’s fuel wholesaler, depot and vehicle leases, insurance policies and any customer contracts with fixed terms. For each agreement, ask whether it can be assigned, whether the other party must consent, and whether a change of control triggers a right to terminate. These are questions of drafting, so the answer sits in each document’s wording. Record the results next to the matching licence and lien findings so the closing checklist reflects them.

• Ontario Business Registry search of the seller and any trade names
• Personal property lien search through Access Now, with a discharge plan for each registration
• Tank list reconciled to TSSA registrations, inspections and removals
• Depot environmental reports and any Environmental Assessment Reports
• Regulator correspondence, including audit results and orders