Taxi fleet due diligence

Between a letter of intent and closing, a buyer needs to confirm that what the seller described exists, can be transferred, and is free of claims. For a taxi fleet, that means testing four things: the right to operate, the cars, the drivers and the contracts. The documents differ by province and city, so this guide names what to request and where to look in British Columbia and Québec, and leaves the rest as questions for the local licensing office. Treat anything the seller says without paper behind it as unconfirmed.

The licence file

Request each licence, plate or authorization with every amendment and renewal. In British Columbia the Board’s transfer page says lists of approved taxi licensees can be looked up on its Operating with a licence page, so check the seller appears on one and that the name matches the one on the documents. Read the terms and conditions, because the Board states that all of them transfer with the licence. Confirm the seller is current on renewals: the Board’s transfer page puts the responsibility to renew on the transferor while approval is pending. Ask the regulator for its transfer requirements in writing. Ask also for the seller’s corporate records, including the minute book, the shareholder register and any shareholder agreement, since they help confirm who must sign for the sale.

Registry searches

The British Columbia government explains that lenders register interests in a debtor’s personal property, and that this includes vehicles and licences. Ask your lawyer which search criteria the registry accepts, and search the seller’s names and each car. A lien search shows which lenders or other secured parties have registered an interest. If the company or cars are registered outside British Columbia, ask your lawyer which registry to search. Ask the seller to deal with every registration found before closing.

Car and authorization records

Ask for registration, ownership and inspection records for every car, and an equipment list. In Québec, the Act says the Société authorizes a car when its owner files an admissible application and conditions are met, and it refers to equipment such as the real-time geolocation device, the taximeter and the domelight. Request the authorization for each car and each driver’s authorization. The Act also says qualified drivers who do not own their car must have in their possession, when offering such transportation, a reproduction of the contract by which the owner entrusts them with it, so ask to see those contracts.

Drivers and labour

Request every driver agreement and a schedule showing who is treated as an employee, who leases, and who is self-employed. The Canada Revenue Agency says an employee generally works under the direction and control of whoever hired them and does not normally have the chance to make a profit or suffer a loss, while a self-employed worker has a contract for services and is free to choose how to carry it out. Compare the written terms with how the work is done. In Québec, check too that every qualified car driven by someone other than its owner has a written contract behind it, because the Act requires such a driver to have a reproduction of that contract when offering transportation. Ask your accountant what exposure a wrong label could leave with the business you are buying.

Contracts and dispatch

List every agreement with an airport, hospital, government body or corporate account, and read each for assignment and change-of-control clauses. Where the seller depends on one account, the customer concentration may itself be a finding. Request the dispatch agreement too. In Québec the Act says a change to a transportation system, including to its operator’s or a supplier’s activities, needs a new authorization from the Commission first where the change is incompatible with the authorization issued or in another case prescribed by regulation, so ask whether the structure of the sale triggers that. Request written confirmation from each counterparty that it will continue.

Regulator and complaint history

Ask the seller for every notice from a regulator, insurer or municipality, and for the fleet’s own record of complaints and accidents. In Québec the Act lets the Société, following an investigation that shows a qualified driver claimed a rate higher than the one fixed by the Commission or by a technological means referred to in section 93, suspend the driver’s authorization or, for a driver registered with a transportation system operator, report the investigation to the Commission, so a pattern of fare disputes is worth asking about. In British Columbia the Board states that taxi operators may only charge rates approved in writing by the Board. Ask each dispatch or driver supplier whether a regulator has ever looked into it. A clean history on paper is worth confirming with the regulator, and your lawyer can say how to ask.

• A licence or authorization that the regulator will not transfer to you, or will transfer only on terms you cannot meet.
• A registered lien over cars or licences that the seller cannot or will not discharge.
• Authorizations or licences that have been suspended, cancelled or allowed to lapse.
• Driver arrangements that do not match how the work is done.
• A key contract that cannot be assigned or that the counterparty will not confirm.