Anonymised, illustrative composite. The buyer of a 62-space Ontario child care centre negotiated a clean asset purchase to leave an old wage claim and an unresolved tax file behind. The licence the whole business runs on cannot be bought that way.
At a glance
A regional operator of three licensed centres agreed to buy a fourth: a 62-space centre in a suburban plaza, with 26 staff, a full waiting list, and roughly $118,000 a month in parent fees and provincial funding. The vendor was a single-shareholder Ontario corporation that had held the licence since 2011.
Two things in that corporation made the buyer uneasy. A former supervisor had filed an employment-standards claim that was still open, and a CRA review of two prior years had been opened and never closed out. Neither was large. Both were the kind of thing a buyer leaves behind by buying assets rather than shares — the ordinary reasoning set out in why vendors prefer shares and buyers prefer assets.
The purchase agreement was drafted as an asset purchase: leasehold improvements, equipment, the enrolment list, goodwill, and an assignment of the plaza lease. Counsel then went looking for the schedule that would assign the operating licence, and found the answer in one line of the statute.
Section 20(5) of the Child Care and Early Years Act, 2014, S.O. 2014, c. 11, Sched. 1 reads, in full: “A licence is not transferable.” There is no application to transfer, no registrar discretion, no conditions regime. The licence is issued to a person, and it stays with that person.
That is not a paperwork problem, because operating without one is prohibited outright. Section 6(1): “No person shall operate a premises where child care is provided except under the authority of a licence to operate a child care centre.” The asset deal, fully performed, would have delivered a fitted-out room, a lease, a staff list and a brand — and no lawful ability to open the doors on Monday.
The alternative to a share purchase was a fresh licence application by the buyer's own corporation. That means an application under s.20(1) in the Minister's approved form, the s.20(1)(b) attestation that the applicant is not prohibited under s.9, whatever further material the Minister specifies, and the prescribed fee. A director must then issue or renew under s.20(4) unless one of three things applies, one of which is a refusal under s.23. Section 23(1)(c) lets a director propose to refuse where the building “would not comply with this Act and the regulations and any other applicable Act, regulation or municipal by-law” — which puts a premises inspection on the critical path.
The buyer modelled the gap conservatively at three months of closed doors: about $354,000 of forgone fee revenue, roughly $190,000 of payroll it would either pay to hold 26 staff or lose them, and the near-certainty that a waiting list of 40 families would not survive a quarter. Against that, the two risks the asset structure was designed to shed were an employment claim the vendor's own counsel valued below $40,000 and a tax review with no assessment issued.
Read the two provisions together and the sector's whole structuring preference inverts. Everywhere else in this corpus, asset versus share turns on tax and on which liabilities travel. Here the asset deal does not deliver an operating business at all, because the one asset that makes it a business is the one asset the Act refuses to move.
A share purchase does not transfer the licence either — and that is precisely why it works. The licensee is the corporation. Change the corporation's shareholders and the licensee is unchanged, so nothing has been transferred and s.20(5) is never engaged. The Act does not treat a change of control as a transfer, and it does not require the director's consent to one.
It does, however, require notice. Section 20(6): “Where the licensee is a corporation, the licensee shall notify a director in writing within 15 days of any change in the officers or directors of the corporation.” That obligation lands on the acquired company on closing day, and it is short enough to outrun a normal post-completion checklist — the subject of the fifteen-day file.
One further constraint shaped the deal. Under s.6(2), a licensee “is authorized to operate the centre only at the premises specified in the licence”, subject to a director's temporary authorisation under s.26. A share deal preserves the licence only so long as the centre stays where it is.
The deal was restructured as a share purchase at the same $1,150,000 headline price. The two liabilities the buyer had been trying to leave behind were dealt with directly rather than structurally: a specific indemnity for the employment claim uncapped and unbasketed, a specific tax indemnity running to the end of the normal reassessment period, and a $190,000 holdback for 18 months to fund both.
The buyer also paid for what a share deal actually costs. Diligence widened from the centre to the corporation: minute book, share register, prior filings, and the licence history. Section 23(2) lets a director propose to revoke or refuse to renew where the licensee, its officers, directors, or any person with a controlling interest has failed to comply with the Act — so the corporation's compliance record became the buyer's problem in a way it would not have been on an asset deal. Closing slipped four weeks.
Had the parties closed the asset deal on its original terms and applied for a licence afterwards, the exposure was not merely commercial. Operating the premises without a licence contravenes s.6(1), which is listed as an offence at paragraph 1 of s.78(1), and s.79 provides that a person convicted of an offence under the Act “is liable to a fine of not more than $250,000, imprisonment for a term of not more than one year, or both.” A buyer under revenue pressure to keep the doors open would have been choosing between a closed centre and a prosecutable offence.
The tell was the assignment schedule. When counsel could not find a statutory transfer mechanism for the central permission — not a hard one, not a slow one, but none at all — that was the answer, not a research gap. In a licensed sector, the first question is not what the licence costs to move. It is whether the statute permits it to move, and what the applicant must be. Compare the restaurant whose liquor licence sat in the vendor's name, where a transfer regime exists and the argument is about its conditions.
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