Motor vehicle dealer licensing on a sale in British Columbia

In British Columbia, motor dealers are registered under the Motor Dealer Act, and, where the minister has an administrative agreement with the authority the Act names, the Motor Dealer Council of British Columbia, the Act lets the Lieutenant Governor in Council delegate to it the administration of the Act’s provisions, except the power to make regulations, with the Vehicle Sales Authority of British Columbia (VSA) the regulator whose pages this guide draws on. Selling a dealership engages several parts of the Motor Dealer Act at once: who carries on business as a dealer, where it may do so, what must be reported within 14 days, and which salespeople may deal with the public. The Act is written around the registered person, its premises and its corporate make-up, not around a sale, so this guide flags what to confirm with the VSA.

Registration attaches to the dealer and its premises

The Act says a person must not carry on business as a motor dealer unless the person is registered, has provided the prescribed security, has paid the prescribed annual renewal fee, maintains repair facilities or files a service contract for them, keeps a sign on the premises, and maintains premises the registrar considers sufficient for displaying motor vehicles. A dealer must also carry on business in its registered name and, subject to an exception for internet sales of vehicles in its inventory, from its business premises. An applicant that carries on business at more than one location applies for registration for each location. A registration expires at midnight on the day before its anniversary, and the registrar may attach terms, conditions or restrictions, including an irrevocable letter of credit as evidence of financial responsibility.

The ownership change is a process to confirm, not a given

A registration is held by a person, and the Act ties it to a registered name, address and premises. The VSA publishes a change of ownership form among its dealer forms, next to forms for change of location and change of name. Its dealer application page says that becoming a licensed dealer involves police information checks for dealership principals and salespeople, credit checks, a licensed salesperson on staff, and payment of the annual licence fees. A buyer of assets should therefore ask the VSA which process applies to the deal and how long it takes, instead of assuming it can trade under the seller’s registration. Asset and share purchases reach the VSA differently.

The people behind a corporate dealer

The registrar may refuse to register or renew, or may cancel or suspend a registration, if the financial responsibility or past conduct of the applicant or registrant, or of its officers or directors where it is a corporation, is, in the registrar’s opinion, such that it would not be in the public interest for it to be registered or to continue to be registered. Where the registrar proposes to refuse, cancel or suspend, the Act requires notice of a right to be heard. For a buyer, that means the directors and officers it puts forward are part of the assessment, whether it applies fresh after an asset purchase or installs new directors in a company that already holds a registration.

Reporting a share sale within 14 days

Under the Motor Dealer Act, a motor dealer must notify the registrar in writing, within 14 days after the event, of a change in its registered name or address, in its officers or directors (or in its members, if a partnership), and, for a corporation, in the beneficial ownership of its shares. A share sale is therefore a reportable event even though the registered corporation does not change. The Motor Dealer Act’s 14 days run from the event, so settle before closing who files the notice. Whether the VSA expects more than a notice on a change of control is worth asking it directly, since a share purchase does not always avoid regulator involvement.

Salespeople and closing day

A motor dealer must not employ or engage a salesperson unless the salesperson is licensed under the regulations as a salesperson. The VSA says a licensed dealership must have at least one licensed salesperson, and that the dealer must make sure all sales and management staff in contact with retail consumers hold valid salesperson licences. Its dealer forms include an employment change form, and its compliance information page says that all new motor vehicle salespeople applying for a salesperson licence must complete and pass the licensing course. In an asset purchase, match the staffing plan to the licences its people hold, and ask how employment is recorded against the new dealer.

Ceasing business and the compensation fund

A person registered under the Act who ceases to carry on business as a motor dealer must at once surrender the certificate of registration to the registrar and request cancellation. A seller that sells its assets and stops trading is in that position. The Act also sets up a Motor Dealer Customer Compensation Fund. After a claim is paid from it, the Motor Dealer Act gives the dealer that caused the claim 30 days after notice, or a longer time the registrar specifies, to repay the amount and any investigation costs, failing which the registrar may cancel its registration. In a share purchase, ask whether any such claim or notice is outstanding against the company, since the company carries its history with it.

• Which VSA process applies: the change of ownership form, a new application, or a notice only.
• Who files the Motor Dealer Act’s 14-day notice for changes in officers, directors and share ownership, and by when.
• Which salespeople hold licences and how each is recorded against the dealer after closing.
• Whether the buyer’s premises, sign and repair arrangements meet the Act’s registration conditions.
• Whether any compensation fund claim, condition or security requirement is outstanding against the seller.