Transferring a liquor licence on a business sale — the Northwest Territories

The Northwest Territories regulates liquor through the Liquor Act, SNWT 2007, c.15, and through the NWT Liquor Licensing Board, to which the Department of Finance directs anyone applying for a liquor licence. When a licensed bar, restaurant or lodge is sold, the Act does not let the seller hand the licence over by contract. It sets up a transfer application that the Board must consider and may approve or deny, and it lists who may not hold a licence at all. The sections below set out what that means for a buyer and seller, and what to ask the Board before the deal closes.

A transfer is a Board order

Section 7 allows a person to apply for the issue or transfer of a licence in accordance with the regulations. Under section 14, the Board shall consider an application for the transfer of a licence and, subject to the manufacturing exception, may by order approve or deny it. For a manufacturing licence, the order approving or denying the transfer must bear the written endorsement of the Commissioner. The deciding body is therefore the Board, and its decision is an order, not a registry filing. A purchase agreement should make Board approval a condition rather than assume it.

The licence is not the seller’s to sell

Section 17 states that a licence remains the property of the Government of the Northwest Territories, and that no person enjoys a vested right in the continuance of a licence. This shapes how a price should be described. The seller can sell the business, the equipment and the lease, but not an entitlement to keep the licence running. A buyer who pays for a business on the assumption that the licence will follow has taken on the Board’s decision as a risk, and the agreement should say who bears it if the Board denies the transfer.

Who cannot hold a licence

Section 5(1) says a licence may not be issued or transferred to or in respect of certain people and premises. They include a minor, an individual who is not a Canadian citizen or permanent resident, an extra-territorial corporation that is not registered under the Business Corporations Act or incorporated under an Act of Canada, and a partnership not registered under the Partnership and Business Names Act. The list also includes a person the Board considers is not the true owner of the business carried on at the premises, a vendor or an employee of a vendor, and a person disqualified under the Act or the regulations. The Government’s registry pages say a partnership formed in the territory must register, and that, with the exception of licensed insurance companies, an extra-territorial corporation carrying on business there as the Business Corporations Act defines it must register with Corporate Registries.

The people around the licence

Section 5(3) extends several of those tests to the applicant’s on-site manager or associate. A licence may not be transferred if that person has a listed conviction, has been disqualified, is a vendor, or is a party to an agreement with a liquor manufacturer or supplier for the sale of that manufacturer’s or supplier’s liquor. Section 6 lets the Board require particulars of the applicant and of its on-site manager and associates, and, for a corporation, of its directors, officers and shareholders. Under section 7(3), knowingly failing to make full disclosure to the Board about the section 5 circumstances is an offence. Ask the Board whether a supplier agreement that comes with the business bears on the transfer.

Buying the shares instead

Section 15 closes the share-purchase route. A corporation that is a licence holder shall apply to the Board for approval of any prospective issue or transfer of shares that would result in a shareholder beneficially owning or controlling more than a stated percentage of the voting rights attached to all outstanding shares. Section 14 then applies as if the application were a transfer application. The percentage is in the section, and a buyer acquiring a company with a licence should read it against the stake being bought rather than assume the licence stays untouched.

Liquor on hand when a licence ends

Section 18 of the Liquor Act provides that a person who ceases to hold a licence shall, within 30 days after the licence expires or is otherwise terminated, deliver all liquor in their possession under the licence to the Commission, unless the Board has made an order of forfeiture. Whether and how that applies when a licence moves to a buyer in a single step is a question for the Board, so ask before pricing inventory into the deal.