How to buy a car dealership in Ontario: licences, ownership rules and what transfers

Buying a car dealership in Ontario means dealing with the Ontario Motor Vehicle Industry Council (OMVIC), which runs the dealer application process described on its register page, and with the registrar that the Motor Vehicle Dealers Act, 2002 creates. Ontario ties the right to act as a dealer to a registration, and that registration does not travel with the business. A buyer therefore has two jobs alongside the purchase agreement: qualifying for registration, and, where the dealership is a corporation, handling the notice the Act requires when shares change hands. This page describes Ontario’s rules only. For the wider picture, including manufacturer approval, read buying a new car dealership in Canada.

The registration rule in Ontario

Section 4(1)(a) of Ontario’s Motor Vehicle Dealers Act, 2002 says no person shall act as a motor vehicle dealer unless the person is registered as a motor vehicle dealer under that Act, subject to the exemptions in section 5 and the regulations. That applies to you as soon as you act as a dealer. The Act also says that if an applicant does not meet the prescribed requirements, the registrar shall refuse to grant or renew the registration (s.5.1). Treat registration as a condition to plan the closing around, and look at the automotive businesses for sale with that in mind.

Why the seller’s registration does not pass to you

Under section 6(3) of the Act, a registration is not transferable. In plain terms, a buyer who purchases the dealership’s assets does not take over the seller’s registration. The buyer applies for one. OMVIC’s register page sets out that process through a Business Application in its online services portal. It says you are not required to have a business premises before submitting that application, but that a premises is required for all dealership registrations, with the location information and supporting documents needed only at the final stage of the review. Ask your lawyer how the closing date should line up with that timetable, and what you will do about trading in the gap if the registration is not yet in place when the seller stops.

Buying shares: the notice to the registrar

If you buy the corporation instead of its assets, a different part of the Act applies. Section 13(1) requires a motor vehicle dealer that is a corporation to notify the registrar in writing within 30 days after the issue or transfer of equity shares, if the issue or transfer results in a person, or persons associated with each other, acquiring or accumulating beneficial ownership or control of the share percentage that section sets, or in an increase in a holding that already met it. This is in addition to the disclosure required under section 7. Under section 13(2), despite subsection (1), if the dealer becomes aware of such a transfer only after it has taken place, the 30 days run from when knowledge of it comes to the attention of its officers or directors. Whether other approvals apply to your structure is a question for counsel.

People who need their own applications

OMVIC says individual applications are required for all officers, directors, owners and partners, the person in charge, signing authorities and those who will trade on behalf of the proposed dealership. Registered salespersons moving to the new dealership must file a Salesperson Change Notice Application, and OMVIC asks that these be filed online right after the Business Application. It also says it has been receiving a high volume of Business Change Notices for changes to persons in charge, officers and directors, prioritized by renewal date, and asks that changes be submitted well in advance of expiry. If you are changing management on closing, build that lead time into your plan, and ask OMVIC which of the people on your list need an individual application before the Business Application can be reviewed as a whole.

Other searches and closing steps

Ontario’s Personal Property Security Act provides for a registration system for security interests, so ask your lawyer to search the seller’s name and confirm what will be discharged on closing. BDC tells sellers they will need a lawyer familiar with business transitions to supply information to buyers during due diligence and to negotiate the purchase agreement. On the federal side, the Canada Revenue Agency says it is important for a seller with a business number to contact its tax services office, since it might have to cancel the number, and a seller with employees must close its payroll account.

• The seller’s current OMVIC registration and any conditions attached to it
• A list of the officers, directors, owners, person in charge and signing authorities, so each can be matched to an individual application
• A list of the registered salespersons who would move to the new dealership
• The share register and records of every issue or transfer of equity shares, if you are buying the corporation
• Results of a Personal Property Security Act search against the seller, plus the lease or title for the premises