Share Purchase Agreement Template Ontario: What to Check Before You Sign

A free share purchase agreement template can look complete. It has parties, a price, promises about the business and a closing section. The risk is that it was written for another place, another size of deal or another kind of business.

This article is a checklist of the points worth checking before you rely on a template in Ontario. It will not replace tailored advice, but it should help you spot where templates tend to leave buyers or sellers exposed.

Is a share purchase the right structure?

In a share purchase the buyer acquires the company itself, so the company's contracts, debts and history stay in place. Buying shares of a corporation is generally not subject to GST/HST, and a change in share ownership does not affect the tax values of the assets the corporation owns. Purchase certificates from the WSIB do not apply to buyers who acquire share capital, because these buyers take on the seller's liabilities by law.

For employees, the Ministry's manual says the successor-employer rule in the Employment Standards Act does not apply to a share sale because the employer stays the same legal entity. If the buyer later winds up or amalgamates the corporation so employees work for another entity, a sale may be found and the rule may apply, depending on the facts.

Where templates often leave gaps

• Statements about the business that are too general, with no list of the specific contracts, litigation or tax filings involved
• Indemnity caps, baskets and time limits copied from a different kind of deal; these are set by the contract, so they must be chosen deliberately
• No holdback or escrow, or one with unclear release rules
• No tie between the price and the working capital or debt at closing
• Closing deliveries that do not list the corporate records, resignations and releases you actually need
• A governing-law or court clause that does not name Ontario

Because the company's liabilities stay with it, a buyer relies heavily on the seller's statements and the indemnity behind them. A seller, in turn, should make sure those statements are limited to what the seller truly knows.

Residency and tax points

If the seller is a non-resident, a template may not mention section 116 of the Income Tax Act at all. Unlisted shares are taxable Canadian property if, at any time in the previous 60 months, more than 50% of their fair market value came from Canadian real property, resource property or timber resource property. A buyer from a non-resident is liable to pay 25% of the amount by which its cost exceeds the certificate limit, due within 30 days after the end of the month of purchase unless a certificate of compliance has been issued.

A buyer is not liable if, after reasonable inquiry, it had no reason to believe the seller was not a Canadian resident. A non-resident seller must notify the Minister by registered mail no later than 10 days after the sale unless a qualifying advance notice was given, and the late penalty is $25 a day, with a minimum of $100 and a maximum of $2,500. Where a tax treaty fully exempts the gain, the seller generally does not need to notify the CRA.

If part of the payment is for a non-compete, the amount is generally included in income. That rule is switched off in set cases for a business or share sale to an arm's length buyer: where the amount is already taxed as employment income, where it is included in proceeds for goodwill and an election is made, or where it relates directly to the sale of an eligible interest such as shares and both parties elect in prescribed form. The election must include a copy of the covenant and is subject to filing deadlines in the Act. Ask an accountant how to word and price this.

Non-competes, employees and privacy

Since October 25, 2021, the Employment Standards Act bars employers from entering into non-compete agreements with employees. Non-competes entered into on or after that date that fall under Part XV.1 are void. Exceptions include executives and a sale where the seller immediately becomes the buyer's employee and agrees not to compete as part of the sale. The Ontario guide describes that business as a sole proprietorship or partnership, so how it applies to a share sale, or to a seller who does not become an employee, depends on the facts and is worth confirming with a lawyer. Courts can still decide whether a non-compete is enforceable.

During due diligence, the parties may share personal information without consent only if they have an agreement limiting its use and disclosure to purposes related to the transaction, the recipient protects it with suitable safeguards and returns or destroys it within a reasonable time if the deal does not proceed, and the information is needed to decide whether to proceed and to complete the deal. After closing, the parties may keep using it if they agree to use it only for the original purposes, it is needed to carry on the business, and one party notifies the individuals within a reasonable time. These exceptions do not apply where the main purpose of the transaction is buying or selling personal information.

Large and foreign deals

Most small deals never reach review thresholds, but a template will not tell you if yours does. For 2026, the Competition Act transaction-size threshold stays at $93 million, measured by the target's assets in Canada or revenue from them. Advance notice to the Competition Bureau is generally required before closing when that test is met and the party-size test is also met, meaning the parties and their affiliates have combined assets or revenues above $400 million. For foreign buyers, the Investment Canada Act sets 2026 thresholds that vary by type of investor, for example $1.452 billion enterprise value for WTO private-sector investors, and $5 million asset value for direct acquisitions by non-WTO investors and in cultural businesses. These figures change, so confirm the current ones.

What to do next

• Confirm whether the deal is for shares or assets and why
• Check where the seller lives for tax purposes before drafting the price terms
• Replace every generic statement with facts about this business
• Choose your own indemnity limits and any holdback
• Decide how any non-compete will be structured and taxed
• Check privacy terms for due diligence and for after closing
• Ask a lawyer to adapt and review the template before anyone signs

Frequently asked questions