What environmental approvals matter when selling a manufacturing business in Ontario?

This page covers Ontario only; if the plant is somewhere else, check the rules where it operates. In Ontario, a manufacturer’s environmental permission can take one of two forms: an environmental compliance approval or a registration in the Environmental Activity and Sector Registry. Which applies depends on the activity. A seller who knows which one the plant holds can plan the paperwork before a buyer asks. The buyer’s side of reading an approval is in buying a manufacturing business in Ontario.

The environmental compliance approval

Under section 9(1) of the Environmental Protection Act, no person shall, except under and in accordance with an environmental compliance approval, use, operate, construct, alter, extend or replace any plant, structure, equipment, apparatus, mechanism or thing that may discharge a contaminant into the natural environment other than water. Section 9(3) sets exceptions, and section 9(4) takes activities prescribed for the registry outside section 9(1), subject to the circumstances it lists. The Ministry of the Environment, Conservation and Parks describes an ECA as the approval for a business’s emissions and discharges related to air, noise, waste and sewage. Pull the plant’s ECA and any amendments before the buyer asks, and check that the equipment actually installed matches what the approval describes. Section 9(1) also reaches altering a process or rate of production with the result that a contaminant may be discharged, or the rate or manner of its discharge may be altered, so changes made since the approval was issued are worth listing. Ask yourself what the buyer’s lawyer would find if they compared the two.

The registry, and why it matters at sale

Section 20.21(1) of the Act provides that, subject to subsections (2) to (4), no person shall engage in an activity at a site if the activity has been prescribed by regulation unless the activity is registered, confirmation of registration has been provided, the activity is carried on in accordance with the regulations, and the registration is not suspended and has not been removed from the Registry. The Ministry states that only specific activities and sectors are subject to registration. If an activity does not meet the registration criteria, the Ministry says the business may instead be required to apply for another type of permission, such as an ECA. The Ministry also states that EASR registrations are specific to the registration holder: if a facility or equipment is sold or otherwise transferred to a new owner, the registration does not transfer with the sale, and the new owner will need to complete their own registration for the activity.

Telling the Ministry about an ECA ownership change

The Ministry’s page on changing an ECA states that you must notify it when the name, address or ownership of your ECA changes or becomes out of date. For ownership changes, the Ministry asks for a signed letter from the previous owner authorizing the transfer of ownership. That makes a letter signed by the seller, as the previous owner, part of the paperwork. This page does not say whether a sale of shares, as opposed to assets, calls for a notice; ask the Ministry or your lawyer how the transaction structure affects it. The signed letter is a small task, but it depends on the seller being reachable and willing at the end of the deal, so put it on the closing list at the start rather than the end.

Exposure does not end at closing

Section 18(1) of the Act lets the Director order a person who owns or owned, or who has or had management or control of, an undertaking or property to do listed things, which include monitoring and recording. The Director may make such an order under section 18(2) if of the opinion, on reasonable and probable grounds, that its requirements are necessary or advisable to prevent or reduce the risk of a discharge of a contaminant, or to prevent, decrease or eliminate an adverse effect the subsection describes. So a seller does not automatically leave environmental obligations behind. Where a record of site condition has been filed, section 168.7 limits some orders against the persons it lists, subject to its conditions and exceptions. Whether a record exists, and whether it matches how the property is actually used, is a fact to establish with the seller’s files before the buyer’s lawyer asks.

• Confirm whether the plant operates under an ECA, an EASR registration or both, and gather the documents
• Check the installed equipment against the ECA, and note any change since it was issued
• If the plant is registered in the EASR, tell the buyer early that they must complete their own registration
• If an ECA is held, prepare the signed letter from the previous owner for the Ministry
• Ask a lawyer how a record of site condition, if any, affects what you still carry after closing

The national picture of equipment, inventory and approvals is in selling a manufacturing business in Canada.