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

In Quebec, the road vehicle dealer permit comes from the Consumer Protection Act (chapter P-40.1), and the Act gives decisions on permits to the president of the Office de la protection du consommateur (OPC). A buyer of a dealership therefore asks two questions: what the permit covers, and what happens to it when the business changes hands. The rules below are Quebec’s own. For the wider picture, including manufacturer approval, see buying a new car dealership in Canada.

Who needs a permit in Quebec

Article 321 of Quebec’s Consumer Protection Act says that, subject to exceptions provided by regulation, a road vehicle dealer must hold a permit. The OPC gives examples of who is covered, and automobile dealers and used-vehicle dealers are on its list. The Act defines a road vehicle dealer as a merchant who acquires road vehicles in order to trade in them. If you plan to buy a dealership’s assets, expect to be the permit holder, so read the automotive businesses for sale listings with your own eligibility in mind.

A permit right cannot be transferred

Article 337 says a right conferred by a permit cannot be transferred, except on the death of the permit holder. In that case the president may authorize the transfer on payment of the fees due and on the conditions the Act and regulations set. A sale is not a death, so a buyer of the assets should not assume the seller’s permit comes with the premises or the inventory, and should expect to apply for its own permit. If you are buying the corporation that holds the permit, ask your lawyer what steps beyond the notices below apply, and how the closing timetable accounts for the OPC’s review.

Changes in directors and partners

This matters most if you buy the corporation. Under article 331, a permit holder must notify the president within 15 days of a change of address, of name, of a director (for a legal person) or of a partner (for a partnership). The OPC’s guidance on changing permit information lists the same 15-day delay for the arrival or departure of a director or partner, and for a change of business name or the addition or removal of other names on the permit. A new board after closing triggers that clock, so have the notices ready on the closing date.

The security bond and the two-year permit

Article 323.1 requires an application for a road vehicle dealer permit to be accompanied by a security bond, in the amount and form set by regulation. The OPC says that furnishing the bond is mandatory to obtain the permit. Article 335 provides that a permit is valid for two years, although the president may issue one for a shorter period, and a permit whose renewal has been applied for stays in force until the president decides; ask the seller when the current term ends and what renewal steps the file shows. Do not rely on the seller’s bond; confirm with your surety and the OPC what you must put in place, and ask whether anything about the seller’s bond file affects your timing. If you obtain your own permit, diarize its dates at once.

What the Office can do with a permit

Under article 327.1, the president may refuse to issue a road vehicle dealer permit to an applicant who, in the five years before applying, was found guilty of a criminal offence of receiving stolen goods, fraud or theft involving a road vehicle or its parts, and who has not obtained a pardon. That is a fixed look-back period set by the Act itself. Ask your lawyer what each director, partner or principal in your group must disclose before you file.

Selling only at the establishment

Article 260.29 says the holder of a permit as a road vehicle dealer may sell or lease long term road vehicles only at its establishment. For a buyer, that ties the permit to where the business operates. If your plan includes moving the operation or adding a second site, ask the OPC what it requires first. The OPC’s change page lists a change of address and the addition or removal of an establishment among the changes to report within 15 days, each with a municipal attestation or other document confirming that the new establishment meets the use rules in force, and says that before starting activities at a new establishment you must wait for a permit to be issued for it.

• The seller’s current permit and its expiry date
• The security bond documents and the surety’s contact details
• A list of directors or partners and any notices already filed with the OPC
• Records showing the establishment where sales and leases take place
• Results of a search of the register of personal and movable real rights against the seller

The regulation that governs the register of personal and movable real rights says the register shall be kept on computer and is composed of name files and descriptive files; ask your notary or lawyer to search it against the seller before you close.