What's the difference between a cross-purchase and a corporate redemption buy-sell structure in Ontario?

In a cross-purchase structure, the surviving shareholders personally buy the deceased shareholder's shares from their estate, and each shareholder typically owns, and pays the premiums on, a life insurance policy on the other shareholders so they'll have the cash to do it. In a corporate redemption structure, the company itself buys back and cancels the deceased shareholder's shares, funded by a policy the corporation owns on each shareholder's life, and the surviving shareholders' proportional ownership simply increases because there are fewer shares outstanding.

The practical difference shows up in who owns and pays for the insurance, how many policies are needed as more shareholders join, and how each approach is taxed — cross-purchase and redemption structures can produce quite different tax outcomes for the surviving shareholders and the corporation, including effects on the shares' adjusted cost base, so this isn't a decision to make on administrative convenience alone. Some agreements use a hybrid structure that lets the parties choose at the time of the triggering event rather than locking in one approach years in advance. Because the tax consequences depend on the specific structure and the company's circumstances, this should be worked through with an accountant and a lawyer before the agreement is signed.