Roofing contractor due diligence

A buyer under a letter of intent is moving from what the seller says to what can be proved. In a roofing business, the findings that matter fall into a few groups: who holds a claim over the vehicles and equipment, whether the workers’ compensation account and any licence are in good standing, how the commercial vehicles have performed, and what obligations sit on roofs already installed or paid for. Some of these can be confirmed in public registries and others only from the seller’s own files. This guide sets out which is which, and what each result means for the deal. It is a checklist for questions, not an opinion on any business.

Registry searches on trucks and equipment

Ontario’s Access Now service lets you find out whether a lien has been filed in the Personal Property Security Registration system, and the province advises searching before buying used goods. Alberta advises searching its personal property registry before buying any items that are considered personal property, and British Columbia’s Personal Property Registry records security interests and liens against personal property belonging to businesses and individuals. Each province runs its own registry. If a claim is registered over the trucks, trailers or lifts, ask the seller and the lender how it would be discharged or paid out at closing. The answer on equipment pledged to two lenders explains the conflict.

Workers’ compensation standing

Ask the seller for the current account statement and any clearance on file. WSIB says a contractor must meet its registration, reporting and payment obligations for its account to be in good standing and eligible for a clearance, and that a clearance is valid for up to 90 calendar days. For an asset purchase in Ontario, WSIB says to request a purchase certificate before the date of sale and that without a valid one it may hold the purchaser liable for amounts the vendor owes. A clearance expires, so confirm the dates against your closing date.

Licence and commercial vehicle checks

If the company works in Quebec, the Régie du bâtiment du Québec offers a way to check a contractor’s licence, so verify the licence class and subclass cover the work performed. If it operates commercial vehicles in Ontario, ask for its CVOR abstract. The province describes a CVOR abstract as a summary of a carrier’s or driver’s safety performance, including collisions, convictions and inspections. If the record shows problems, ask the seller about them and ask your insurer whether they matter.

Treat the seller’s answers as a starting point. Where a document can be obtained from a registry or a regulator directly, do that rather than relying on a copy supplied by the seller. A registry result carries a date that you can compare with your closing date.

Safety documentation and insurance history

Roofing is work at height, so ask for the fall-protection plans, training records and incident reports, and for any order, stop-work notice or inspection finding from the provincial workplace safety regulator. Each province has its own regulator and rules, so confirm which body applies where the crews work. Ask for the company’s insurance claims history and for the policies in force, including who is named on them. If the history shows incidents or claims, ask the insurer and the seller about them.

Open roofs, deposits and people

Build a schedule of every job under way, with the contract price, deposits received and work completed. A deposit received for work not yet done is an obligation you may inherit. Ask for the callback log for recent completed roofs and for any written complaint or insurer correspondence. For staff, the answer on successor employer liability explains why an asset purchase does not always end the seller’s employment history.

Each finding needs a decision, not just a note. A problem the seller can fix before closing, such as a discharge or a balance owing, can be made a closing condition. A problem the seller cannot fix, such as a claim on a finished roof, is a question about price, holdback or indemnity, which a lawyer should draft. A problem the seller will not discuss is information in itself. Keep a written list of what you asked for, what you received and what is still outstanding, so the decision to proceed rests on documents rather than recollection.

• A registered security interest that will not be discharged before the sale is completed (Ontario’s Access Now page says a buyer should insist on a registered discharge where the loan has been repaid)
• A workers’ compensation account with amounts owing, because in Ontario WSIB may hold an asset purchaser without a valid purchase certificate liable for amounts the vendor owes
• A missing or lapsed licence for the work being done in a province that requires one
• Unresolved leak or workmanship claims that the seller wants the buyer to assume without adjustment
• Deposits held for jobs the business cannot afford to finish