Transferring a liquor licence on a business sale — Newfoundland and Labrador

A restaurant, bar or lounge in Newfoundland and Labrador is licensed under the Liquor Control Act, RSNL 1990 c. L-18. The Act does not let a sale carry the licence to the buyer on its own. A licence shall not be transferred except with the written consent of the board, and the “board” is the board of directors of the Newfoundland and Labrador Liquor Corporation (NLC). So the licence is something the buyer has to be approved for, not something the seller can deliver at closing. This guide walks through what the Act says about that approval, what NLC says in its own licensee guidance, and what to settle in the purchase agreement.

Written consent, surrender and a new licence

Section 44 of the Act sets the sequence. If the board approves the transfer, the transferor surrenders the licence to the board, and the board issues a new licence to the transferee for the balance of the unexpired term of the surrendered one. The Act adds that the transfer is considered not to be completed until the new licence has been issued and the prescribed fee has been paid. Because the Act treats the transfer as incomplete until then, a closing date that assumes the buyer can serve on day one needs either the new licence or the interim letter NLC describes below. Ask NLC what the buyer may do in the meantime.

What the board can weigh

Section 33(3) lets the board refuse an application for a licence, or refuse to approve a transfer, where past conduct establishes reasonable grounds for the belief that the applicant will not carry on business in accordance with the law and with integrity and honesty, and the next paragraph, joined to it by “and”, refers to an applicant carrying on activities that are, or will be, where the applicant is licensed, in contravention of the Act or regulations. A public-interest ground is written only for applications for a licence. Section 45 then applies the application machinery of sections 34 to 41 to a transfer, with the necessary changes, while allowing the board to dispense with as many of those provisions as it considers desirable. Ask NLC which parts it applies to your transfer.

Objections and hearings

Section 49 covers the case where someone objects to a transfer, or where the board proposes not to transfer a licence. The board must then send written notice requiring the licensee to show cause, and the notice must state when and where the licensee or the proposed transferee will be heard. Under section 49(2) of the Liquor Control Act, that notice goes by registered mail to the licensee or proposed transferee at least 7 clear days before the hearing, and under section 49(3) the hearing is open to the public. A buyer who learns that an objection has been made should treat the hearing date as a closing condition, not a footnote.

What NLC says about transfers

NLC’s licensee FAQ says that to transfer an existing establishment licence an application must be made to NLC. The documentation is the same as for a new licence, depending on the class of licence, plus a letter from the current licensee agreeing to the transfer. NLC also says that if the buyer intends to operate the business while the application is being processed, a letter from the current licensee allowing use of the licence is required. NLC will consider an application only after the fee and all approvals and documentation are received. That makes the seller’s cooperation a deal term: the seller signs the consent letter, so the agreement should say when.

Buying shares does not avoid the question

If the licensee is a company and the deal is a share purchase, the licence stays in the company’s name, but section 44(4) still reaches the deal. The directors of a company that is a licensee shall present to the board for approval a proposed issue or transfer of shares, and where the board considers that a substantial interest is proposed to be issued or transferred, the section and section 45 apply as if the company were proposing to transfer its licence. The Act leaves “substantial interest” to the board’s opinion. Ask NLC, before signing, whether the stake being sold meets it.

• Ask NLC which licence class the premises hold and which application and approvals that class needs. The FAQ says they vary by class.
• Make the board’s written consent, or the new licence itself, a condition of closing.
• Get the seller’s consent letter, and any letter allowing the buyer to operate in the meantime, into the agreement as signing deliverables.
• If the deal is a share sale, ask whether the board will treat the interest as substantial before the shares change hands.
• Confirm who must be present at any hearing and whether anyone has filed an objection.