How do I buy a daycare in Ontario?

How you buy a daycare in Ontario depends first on what you are buying: the centre’s assets, or the shares of the corporation that holds the licence. The Child Care and Early Years Act, 2014 says a licence is not transferable, and the Ministry of Education’s Child Care Centre Licensing Manual treats an asset purchase and a share purchase differently. That choice decides whether you apply for a new licence, how much notice the seller must give, and whether you need to apply separately to enrol in the Canada-wide early learning and child care (CWELCC) system. This guide follows those steps for a buyer, using the Act, its regulation and the Manual.

An asset purchase means a new licence

The Manual describes a purchase in which the buyer takes some of the centre’s assets but does not acquire the licensed corporation. It notes that the licence issued by the Ministry is not an asset that can be sold or transferred. It says that when the legal entity responsible for operating and managing the centre changes, a new licence is required. Section 6(1) of the Act says no person shall operate a premises where child care is provided except under the authority of a licence to operate a child care centre, subject to the exceptions in section 6(3), and section 20(5) says a licence is not transferable. As the buyer, you are the one applying, and the sale cannot give you the right to operate.

How the application runs

The Manual says the current licensee must notify their program advisor in writing of their intent at least 30 days before the tentative closing date. Once the Ministry knows who the new owner will be, the program advisor contacts the future licensee about the steps and documents. The legal entity that would run the centre must then start the licensing process as if it were an initial applicant, beginning by registering with the Child Care Licensing System. If the current licence will be expiring soon, the Manual says it is best to apply for a licence renewal, and that the program advisor then conducts a licensing inspection with both the current and future licensee present, after which the two must decide who is responsible for any outstanding requirements. The Manual also warns that there is no guarantee the proposed future licensee will be licensed. Ask the seller to give the 30-day notice early, and write into your agreement who deals with any inspection findings.

A share purchase works differently

The Manual says that when an incorporated licensee sells some or all of the shares of their corporation, a new licence is not required, because the legal entity responsible for the centre does not change. It adds that the current licensee must still contact their program advisor to let them know what is happening, so they can discuss what needs to be done. A share purchase brings other questions that these sources do not answer, such as what liabilities stay in the corporation. Take those to your lawyer. For the seller’s side of these steps, see how to sell a daycare in Ontario.

CWELCC enrolment does not come with the sale

The Manual says that when the legal entity responsible for the centre changes, the new entity must apply to its service system manager if it wants to enrol in CWELCC. Part 2 of the Manual lists three reasons a service system manager can deny enrolment: the program is not or will not be financially viable, there is reason to believe CWELCC funds would not be used properly, or the program is not consistent with the manager’s targeted growth plan. If the manager decides to enrol the program, it works with the licensee to execute a service agreement. Ask the service system manager early, since your plans for the centre may depend on its answer. The Manual ties this step to a change of legal entity, so ask the manager how it treats a share purchase.

The supervisor and the staff

Ontario Regulation 137/15 says every licensee of a child care centre shall employ a supervisor, who shall be a person described in section 53, who plans and directs the program, is in charge of the children, oversees the staff and is responsible to the licensee. Whether you buy assets or shares, ask who will fill that role on day one and whether the current supervisor intends to stay. Confirm with the program advisor what the Ministry will want to see about the supervisor during the licensing process.

Questions to settle before you sign

• Is this an asset purchase or a share purchase, and has the program advisor confirmed what that means for the licence?
• Has the seller given the written notice that the Manual requires at least 30 days before the closing date?
• Who will be the supervisor named in section 53 terms, and will they be in place at opening?
• Has the service system manager said whether it will enrol the centre in CWELCC?
• Who is responsible for fixing anything the program advisor finds at the inspection?

For the national overview, see buying a daycare business in Canada. This guide covers Ontario only; check the rules where the centre is.