Selling or Buying Business Assets in Ontario?

Do Not Overlook a WSIB Certificate

By Jide Babalola

Introduction

Buying or selling the assets of a business is a common transaction in the commercial world, but it often involves a variety of financial and legal considerations. For the seller, ensuring the integrity of the sale and confirming that all representations about the liabilities of the business are accurate is crucial. Sellers typically do not want to be held responsible for any liabilities that arise after the sale is complete. On the other hand, buyers want to ensure they are not exposed to liabilities that predate the closing of the transaction and will usually seek assurances to that effect. One important document, often overlooked, that can help alleviate these concerns is a clearance certificate issued by the Workplace Safety and Insurance Board (“WSIB”) in Ontario.

What is a WSIB Certificate?

Under the Ontario Workplace Safety and Insurance Act (“WSIA”), employers in certain high-risk sectors must insure their employees with the WSIB against work related injuries, illnesses, or fatalities. As a result, employers must pay premiums to the WSIB for this coverage. While the employer remains liable for any amounts owed under the WSIA, Section 146 of the WSIA also makes the purchaser of all or part of an employer's business liable for any amounts owed by the seller to the WSIB at the time of the transaction.

The WSIB issues two certificates to help buyers and sellers confirm the seller's WSIA compliance at the time of sale: a clearance certificate and a purchase certificate.

A clearance certificate is issued by the WSIB to confirm that the seller’s business is active and in good standing with respect to its WSIB obligations up to a specified date. The purchase certificate, in addition to providing the same confirmation (by implication), includes clear language that ensures the purchaser is not held liable for any amounts due from the seller to the WSIB as of the expiration date noted on the certificate.

Consequences of Not Obtaining a WSIB Certificate

In the absence of a WSIB purchase certificate in a business asset purchase transaction, the purchaser may encounter an undesirable outcome, potentially assuming liability pursuant to the WSIA for any outstanding amounts or obligations owed by the seller prior to the closing date. On the other hand, the seller should ensure their WSIB compliance status is up to date before completing a sale. This includes verifying that all representations and warranties regarding their pre-closing WSIB obligations are accurate to avoid any post-closing contractual claims for outstanding pre-closing WSIA obligations from the purchaser. Obtaining a WSIB clearance certificate is essential for the seller to achieve this. In some cases, the completion of the business asset sale transaction may not proceed smoothly without at least one of these certificates, which is typically a requirement for the purchaser at closing.

Conclusion

Given the potential consequences of not obtaining a WSIB certificate, businesses involved in the sale or purchase of assets should carefully assess whether obtaining the certificate is necessary for their transaction. To obtain a clearance certificate, businesses can typically engage in a simple online process with WSIB. In the case of a purchase certificate, businesses will need to complete and submit standard WSIB forms for processing. These forms will require relevant details about the transaction, such as the assets being sold, the seller's WSIB number, the purchaser's WSIB number, and any relevant authorizing documents (e.g., appointing representatives).

If you have any questions regarding the sale or purchase of a business, or the applicability of a WSIB certificate to your transaction, please contact our Corporate and Commercial Department or Jide Babalola at jbabalola@sorbaralaw.com.