Motor vehicle dealer licensing on a sale in Alberta

In Alberta, a motor vehicle dealer’s licence cannot be sold with the dealership. The Automotive Business Regulation under the Consumer Protection Act says a licence confers no property right and that no business operator may sell, transfer, assign, lease or otherwise dispose of or deal in a licence. The Government of Alberta lists licensing businesses and salespeople among the roles of the Alberta Motor Vehicle Industry Council (AMVIC). What a sale does to the licence therefore depends on its shape, and this guide sets out what the regulation and AMVIC’s pages say about each.

What the regulation says about the licence itself

AMVIC states that automotive businesses in Alberta, including sales, service and repair, consignment, lease, wholesale and agent or broker businesses, must hold a valid AMVIC licence. Under section 5 of the Automotive Business Regulation a licence has a term of one year and may be renewed for additional one-year terms, though the Director may issue or renew one for a shorter term where, in the Director’s opinion, that is in the public interest. A licence holder is not authorized to carry on any class of activity the licence does not specify, so compare the classes on the seller’s licence with what the business does. The Director may refuse to issue or renew a licence where the applicant cannot show that it complies with the laws that apply to the business, including municipal bylaws, where in the Director’s opinion it has contravened the applicable codes of conduct, or where a claim has been paid from the compensation fund in respect of it and not reimbursed.

Asset sale: the buyer applies in its own name

Because the seller cannot assign its licence, a buyer of the assets is an applicant. AMVIC’s page on closing a business says that when a business is closing or changing ownership, the operator must notify AMVIC in writing within 15 days of when it ceases activities related to automotive business, and must return its licence. The same page adds that once a business ceases to be AMVIC-licensed it can no longer engage in automotive business. A buyer that wants to trade from the first day should ask AMVIC how long a new application takes and whether the timing can be lined up with closing, rather than assuming the seller’s licence carries across.

What the closure notice should cover

AMVIC lists what a closure notice should include: why the business is closing, whether it is a takeover or a complete closure, who will do repairs or installations promised before closing, who will deal with warranty issues, and how customers were told. A business licensed for sales, lease or consignment must also make sure its levy payments are up to date. These are the seller’s obligations, but a buyer taking over the customers has an interest in each answer, so the agreement can say who gives the notice and who stands behind earlier promises.

Share sale: the company stays the licensee

In a share sale the company that holds the licence is still the business operator, which is why a share purchase can avoid a licence transfer, as asset sale versus share sale explains generally. That does not make the sale invisible to AMVIC. AMVIC says that if there are changes to a company’s directors, the company must inform AMVIC through AMVIC Online, and its closing page asks for written notice within 15 days where partners, officers or directors change. For a partnership the regulation goes further: the licence expires when there is a change in the partners, and the remaining partners must notify the Director and return the licence. The AMVIC pages read for this guide do not discuss a change in shareholders, so confirm whether a change of control triggers anything beyond director and officer notices.

Salespeople must be linked to the new licensee

Salespeople are registered separately. The regulation says a business operator may not allow a salesperson to act on its behalf unless the salesperson is registered for the class of licence the operator holds and the operator authorizes them. AMVIC adds that the business makes that authorization through AMVIC Online and that the salesperson must be linked to a licensed automotive business. Under section 21 of the Automotive Business Regulation, when a sales, leasing or consignment operator stops authorizing a salesperson, it must tell the Director in writing, either before the authorization ends or within 15 days after. AMVIC also notes that a business can be charged for allowing an unregistered salesperson to conduct transactions, so ask how each salesperson will be linked to the buyer’s licence on closing day.

Records outlast the sale

Under the Automotive Business Regulation, every business operator and former business operator must keep the records and documents created or received while carrying on the licensed activities for at least three years after they were created or received. A seller of assets therefore stays responsible for its own records, and a buyer that needs deal files or warranty history should negotiate access in the agreement. A buyer of shares acquires the company that holds those records.

• Whether the buyer’s licence application can be decided before the closing date, and which licence classes it must cover.
• Whether a change of control in a corporate licensee needs anything beyond director and officer notices.
• Who gives the closure or takeover notice, and what it says about repairs, warranty and customers.
• How each salesperson will be authorized under the buyer’s licence, and who tells AMVIC that the seller’s authorization has ended.
• Which records the seller must keep, and how the buyer gets access to them.