Selling a taxi fleet in Canada

An owner who has decided to sell a taxi fleet faces an extra step, because the right to operate the cars as taxis is granted by a regulator. Where a licence transfers, the deal includes an approval step. This guide follows the order an owner would work through: what is for sale, which structure fits, what the regulator needs, what to prepare, how to keep the sale confidential, and what to clear off the cars before closing. The rules differ by province and city, so the examples below are labelled by place.

Decide what is for sale

List what the business holds: the cars, the licences or plates, any dispatch system, the contracts and the driver relationships. Each has a different route to a buyer. Cars can be sold, but in Québec the Act says the owner of a qualified automobile may not transfer it unless the owner obtains the cancellation of the Société de l’assurance automobile du Québec authorization for that car or, as the case may be, the striking off of the owner’s registration with a transportation system operator. Contracts may need the other party’s consent. Licences need the regulator. Work out which items the buyer is paying for before talking to anyone.

Choose the structure with the regulator in mind

In British Columbia the Board says it does not need to approve share transfers, though if it becomes aware of a major transfer of shares, new majority shareholders or directors may need to complete a disclosure form or supply further information. A licence moving to a different business entity needs approval from the Board. Compare an asset sale with a share sale with your lawyer, and ask the regulator directly how it treats each. The structure that is simpler for the regulator may not be the one that suits your tax position.

What the regulator needs

The Board’s transfer page says the transferor is responsible for renewing the licence while waiting for approval, and that all the terms and conditions attached to the licence transfer together; a single term cannot be moved on its own. The Board’s administrative-transfers page says that under the Act the Board may approve a transfer if it considers the applicant a fit and proper person and capable of providing a service. The Board’s transfer page lists transferee attachments for a regular transfer, including a business plan and financial information, so ask the buyer how it will assemble them. A rule quoted on the Board’s administrative-transfers page says that promptly after a licence is transferred, the person transferring it must ensure the vehicle identifiers stop being displayed, collect them or notify the registrar of any not collected, and return to the registrar any collected identifiers that the registrar issued.

Prepare the records

BDC says an accountant helps prepare year-end and interim financial statements, projections and other documents that buyers typically ask to see in due diligence, and that a valuator will ask to look at historic and interim statements, projections, tax returns and other records. It suggests reviewing records with your accountant so interim statements are accurate and projections realistic. For a fleet, add the licence documents, a car-by-car schedule showing age, registration and who holds any lien, driver agreements, and every contract with an airport, hospital or corporate account. Gather the paperwork that shows how each driver is engaged. A buyer’s lender and the regulator may each ask for part of the same file, so ask each what it needs.

Keep it confidential

BDC says a change in business ownership can be disruptive for employees, customers and suppliers, and cautions that, depending on a listing site’s confidentiality procedures, word could get out to employees, customers or suppliers that you are selling. Ask any marketplace or adviser how enquiries are screened and what a prospective buyer must sign before seeing the drivers, accounts or licence file. Decide in advance who inside the company is told and when.

Clear the cars before closing

The British Columbia government explains that lenders register interests in a debtor’s personal property, and that this property includes vehicles and licences. If a lender holds security over your cars, ask how it would be released or dealt with at closing, and what a buyer’s lender would require. Search the registry for your own name before a buyer does, and ask your lender what a discharge requires. If the cars or the company are registered outside British Columbia, ask your lawyer which registry to search.

Plan the calendar around the approval

Because the transferor in British Columbia remains responsible for renewing the licence while approval is pending, keep renewals, registrations and inspections current through closing. Ask the regulator how long a transfer takes and what it needs from both sides, and ask your lawyer about making the sale agreement conditional on approval so that neither side is bound to a deal the regulator then refuses. Allow time for the buyer’s lender, who may attach its own conditions. Tell drivers and staff only when the plan for them is settled.

• Which licences or authorizations are being sold, and which regulator approves each transfer?
• Are you selling assets or shares, and how does the regulator treat each?
• Who will renew licences while approval is pending?
• Which cars carry a lien, and what does each lender need to release it?
• What will a buyer sign before seeing drivers, accounts or the licence file?