What Construction Act and WSIB duties matter when selling a construction company in Ontario?

An owner selling a construction company in Ontario deals with two sets of duties to have in order before a sale: those under the Workplace Safety and Insurance Act, 1997 (WSIA), administered by the WSIB, and those under the Construction Act (R.S.O. 1990, c. C.30). The first decides what a buyer may inherit from your WSIB account and whether your customers can keep you on their jobs. The second decides how you must hold the money you receive on contracts, and when holdback owed to you can be collected. This page covers Ontario only and the seller’s side. If you operate elsewhere, check the rules where you are.

The WSIB purchase certificate on an asset sale

WSIA section 146(1) applies when an employer sells, leases, transfers or otherwise disposes of all or part of its business, directly or indirectly, to another person, with named exceptions such as a trustee in bankruptcy and a receiver. Section 146(2) makes that person liable to pay all amounts owing under the Act by the employer immediately before the disposition, so read the whole section with a lawyer before assuming who bears what. The WSIB tells parties to an asset sale to get a purchase certificate, to request it before the date of sale, and says that without a valid one it may hold the purchaser liable for all amounts owed by the vendor up to the date of sale. The WSIB also says that if you are selling shares, a new legal entity is not created and a purchase certificate is not required.

Closing your account after the sale

The WSIB states that a purchase certificate is valid for 30 days from the date of issue printed on it, so time the request around your closing date. It also says you still need to send a closure request once the sale is completed, to advise of the last date employees were employed by the seller. The certificate does not replace that step. If you are selling shares instead, the WSIB says no new legal entity is created, so ask the WSIB how your account is handled. Existing claims are a separate subject, covered in what happens to existing WSIB claims when a business is sold.

Clearances on live jobs

WSIA section 141.2 requires a person who directly retains a contractor or subcontractor to perform construction work to obtain a certificate before permitting it to begin, except for exempt home renovation work. The WSIB’s construction policy says a principal who directly retains a contractor must obtain one confirming the contractor is in good standing, and that a clearance must remain in effect for the entire time the contractor is performing the work. Section 141.2(7) adds that the contractor or subcontractor shall not perform construction work for that person during a period for which no certificate is in effect. The policy also says a clearance is valid for up to 90 calendar days, depending on the date it is issued, and is renewable. The same policy says an account must be in good standing to be eligible for a clearance. Check that yours is, and whether any clearance on a live job will need renewal during the sale process.

Trust funds and records under the Construction Act

Section 8(1) of the Construction Act makes amounts owing to or received by a contractor or subcontractor on account of the contract or subcontract price, including any holdback owed to or received by it, a trust fund for the subcontractors and other persons who supplied services or materials and are owed amounts. Section 8.1 requires those funds to be deposited into a bank account in the trustee’s name and requires written records detailing amounts received into and paid out of the funds. Check that those records exist, are current and reconcile before a buyer asks for them.

Holdback you are owed does not arrive at closing

Section 26 of the Act governs when holdback is paid. Following each anniversary of the date the contract was entered into, the owner publishes a notice of annual release of holdback and pays accrued holdback to the contractor at least 60 days but not later than 74 days after that notice, unless a lien has been preserved or perfected and the conditions in section 26(4) apply. Holdback that is not paid under that route is paid after the liens that may be claimed against it have expired or been satisfied, discharged or otherwise provided for, and the owner has 14 days after that to pay the contractor. The timing is set by statute and by the status of liens, so a seller cannot assume collection on the closing date. Plan for how any open holdback is treated in the sale agreement, and take advice on the wording. For the wider sale process, see how to sell your construction company.