Asset Purchase Agreement in Ontario: What It Must Include

When you buy or sell a business by assets, you are not buying a company as a whole. You are buying a defined list of things: equipment, inventory, contracts, a name, perhaps a lease. The asset purchase agreement is the document that says exactly what moves and what does not.

No single Ontario form decides what the agreement must say. What it should include comes from the deal, plus several tax, employment and registry rules that affect how a buyer and seller protect themselves. This article walks through the main parts so you know what to ask about.

Asset deal or share deal?

In a share sale, the buyer takes over the corporation, and the corporation keeps its history, including its debts. In an asset sale, the buyer picks the assets it wants and leaves the rest. That choice changes several rules.

For example, buying shares is generally not subject to GST/HST, and a change in share ownership does not affect the tax values of the corporation's assets. The WSIB's purchase-certificate policy does not apply to buyers who acquire a business through a share purchase, merger or amalgamation, because these buyers take on the seller's liabilities by law. Which structure fits depends on the facts, and it is worth settling with a lawyer and accountant before the agreement is drafted.

Listing the assets and the excluded liabilities

The heart of the agreement is two lists. The first describes the purchased assets as precisely as possible. The second describes the excluded liabilities, meaning the debts and obligations the seller keeps.

• Tangible assets: equipment, vehicles, inventory, furniture, with serial numbers where possible.
• Contracts and leases the buyer is taking over, noting any that need a third party's consent.
• Intangibles: the business name, customer lists, websites, phone numbers, licences and goodwill.
• Excluded assets: cash, personal items or anything else the seller is keeping.
• Excluded liabilities: unpaid taxes, supplier debts, claims arising before closing, and anything else you agree stays with the seller.

Some liabilities may follow the business even if the contract says otherwise. When an employer sells or otherwise disposes of all or part of its business, the buyer is liable for amounts the seller owed under the Workplace Safety and Insurance Act immediately before the sale.

Checking for liens and WSIB amounts

Before buying used business assets, a buyer can search Ontario's Personal Property Security Registration system through ServiceOntario's Access Now to see whether a lien is registered. Searches can be run against an individual debtor, a business debtor or a motor vehicle.

A WSIB purchase certificate relieves the buyer of the seller's WSIB liability up to the date of sale. The seller's account must be in good standing, the certificate is valid for 30 days from issue so the sale must close within that window, and the seller must notify the WSIB within 10 days of the sale.

Price allocation and tax elections

The agreement should divide the price among the assets. The CRA says a buyer can use the individual asset prices in the agreement to calculate capital cost allowance if they are reasonable. Otherwise the buyer must reasonably allocate the price at fair market value, and the balance goes to goodwill. The buyer's allocation should match the amounts the seller used when reporting the sale.

If part of the payment is for a non-compete, the Income Tax Act treats each part of the amount as paid for the item it reasonably relates to.

Even with the GST/HST election, tax still applies to taxable services the seller is to provide, taxable supplies by lease or licence, and, where the buyer is not a registrant, taxable sales of real property.

Employees, privacy and closing terms

If the buyer hires the seller's employees, their employment is deemed not to have been terminated for Employment Standards Act purposes, and time worked for the seller counts as time worked for the buyer. That continuity does not apply if the buyer hires the employee more than 13 weeks after the earlier of the employee's last day with the seller and the day of the sale.

Customer and employee information is also part of the deal. During a prospective transaction, the parties may share personal information without consent if they have an agreement limiting its use to purposes related to the transaction, protect it with suitable safeguards, and return or destroy it if the deal does not proceed. This exception does not apply where the main purpose of the deal is buying or selling personal information itself.

Closing terms usually cover the closing date, what each side delivers, adjustments for prepaid items, and conditions that must be met first. A seller with employees must also close its payroll account, and must contact its tax services office to close a GST/HST account.

What to do next

• Decide with your lawyer and accountant whether an asset or share structure suits the deal.
• Prepare a full list of purchased assets and a clear list of excluded liabilities.
• Run a PPSR search and ask your lawyer whether other searches are needed.
• Plan the price allocation and confirm whether the GST/HST election applies.
• Check WSIB status and time the closing within any purchase certificate window.
• Raise special cases early: a non-resident seller, a very large deal, or a foreign buyer.

Large transactions may need advance notice to the Competition Bureau. For 2026 the transaction-size threshold stays at $93 million, and a notice is generally required when the parties' combined assets or revenues also exceed $400 million. Foreign buyers face separate Investment Canada Act review thresholds. These figures change each year, so confirm them before relying on them.

Frequently asked questions