Share Purchase Agreement Ontario: What Buyers and Sellers Must Know

If you are buying or selling an Ontario corporation, you will probably be asked to sign a share purchase agreement. It is the main contract in a share deal, and it sets the price, the promises each side makes and what happens if something goes wrong after closing.

This article explains in plain language what the agreement is, when owners choose a share deal over an asset deal, what the document should address and which tax and filing points often come up. It is general information, not advice on your deal.

What a share purchase agreement is

A share purchase agreement is a contract in which the shareholders (the sellers) agree to sell their shares in a corporation to a buyer. The buyer ends up owning the corporation. The corporation keeps its contracts, its assets, its debts and its history, because the company itself has not changed. Only its owners have.

That is the key difference from an asset deal, where the buyer picks particular assets and the seller keeps the corporation. Owners often prefer a share deal when they want the business to carry on without having to transfer each contract, licence and employee one by one. Whether that is realistic depends on the contracts and licences involved, so each one should be reviewed.

What the agreement should cover

There is no single template that fits every deal, and what makes an agreement workable depends on the facts. In practice, a well-drafted agreement spells out the following points clearly so that neither side is left guessing.

• Who the parties are, how many shares are being sold and of which class.
• The price, how it is paid, and any holdback or adjustment after closing.
• Statements each side makes about the business, such as its finances, debts, contracts and legal disputes.
• Conditions that must be met before closing, such as third-party consents or a clean review of the books.
• What happens if a statement turns out to be wrong, including how a claim is made.
• Changes to directors and officers at closing, and any resignations.
• Restrictions on the seller after closing, if the parties agree to any.
• Which province's law applies and how disputes will be resolved.

If the corporation has a shareholders' agreement or restrictions on transferring shares, those documents also need to be read first, since they may require approvals or give other shareholders rights. A lawyer can confirm how they apply to your corporation.

Tax points that often shape a share deal

For sellers, the biggest tax question is usually the lifetime capital gains exemption. The exemption limit is indexed to inflation and depends on the date of the sale. Because the amount is indexed and the rules have changed recently, confirm the current figure for your closing date with an accountant.

Only individuals who are residents of Canada can claim the capital gains deduction, so it is relevant to someone selling shares, not to a corporation selling its own assets. The deduction is calculated on Form T657 and claimed on line 25400.

How these tests apply depends on your situation, so planning early with an accountant is worthwhile.

Family deals, large deals and filings after closing

If shares or other property are transferred to a spouse, a person under 18 or a person you do not deal with at arm's length, the transferor and transferee can be jointly and severally liable for part of the transferor's tax, up to the lesser of the excess of the property's fair market value over what was paid and the transferor's tax liabilities. This is worth knowing in family or related-company deals.

Very large transactions may need pre-merger notification under the Competition Act. For 2026, the transaction-size threshold is $93 million and the party-size threshold is $400 million. Typical small-business deals fall well below these.

After a share sale changes who runs the company, the paperwork continues. Ontario corporations must report changed information to the ministry within 15 days. A privately held Ontario corporation must also keep a register of individuals with significant control, meaning 25% or more of voting shares or of fair market value, or significant influence, and update it within 15 days of becoming aware of a change. The CRA also expects the correct name and SIN of each corporate director to be on file.

What to do next

• Gather the articles, bylaws, share register, minute book and any shareholders' agreement.
• List the contracts, leases and licences and note which may need consent when ownership changes.
• Ask an accountant whether the shares are likely to qualify for the capital gains deduction and what to do before closing.
• Agree the main business terms in writing, such as price and timing, before drafting begins.
• Have a lawyer review or draft the agreement before anyone signs.
• Plan the post-closing filings: ministry updates, the register of individuals with significant control and CRA records.

Getting advice before you sign is usually far cheaper than fixing a problem afterwards.

Frequently asked questions