- In a share sale, the buyer purchases the shares of the corporation that operates the business.
- Many commercial leases don't stop at restricting assignment and subletting.
A common assumption when structuring a business sale is that if you sell the shares of the corporation rather than its assets, you avoid the whole process of getting landlord consent to assign the lease. It's true as far as it goes — but the assumption can break down the moment you actually read the lease.
This article explains why a share sale generally doesn't trigger a formal lease assignment, and where many commercial leases close that gap anyway.
The Common Assumption
In a share sale, the buyer purchases the shares of the corporation that operates the business. The corporation itself, as a legal entity, doesn't change. It's still the same tenant named on the lease before and after closing; only its ownership changes.
Because the tenant of record doesn't change, a share sale generally doesn't require a formal assignment of the lease the way an asset sale does. There's no new tenant stepping into the lease — the existing tenant continues, just under new ownership.
Where This Assumption Breaks Down
Many commercial leases don't stop at restricting assignment and subletting. They also include a change of control clause — language that specifically defines a change in the ownership or control of a corporate tenant as an event requiring the landlord's consent, or in some leases, even as a default or early termination trigger.
Where a lease includes this kind of clause, a share sale can trigger the exact same landlord involvement that an asset sale's assignment clause would, even though, strictly speaking, nothing is being "assigned." The lease itself simply expands the definition of what requires consent.
This matters because Ontario's Commercial Tenancies Act protection — that a lease clause against assignment or subletting without consent is generally read as requiring that consent not be unreasonably withheld — applies specifically to assignment and subletting restrictions. A separately drafted change of control clause is a different kind of covenant, and its own wording, rather than that statutory backstop, controls how strictly it's enforced.
What to Look For in the Lease
| Clause Type | What It Covers | Effect on a Share Sale |
|---|---|---|
| Assignment/subletting clause only | Transfers of the lease itself to a new tenant | Generally not triggered — the tenant entity doesn't change |
| Change of control clause | Defined ownership/control changes in the tenant corporation | Can be triggered by a share sale, requiring landlord consent |
| Both, drafted separately | Each covers its own scenario | Share sale checked against the change of control language specifically |
| Neither | Lease is silent on ownership changes | Least restrictive, but confirm there's no ambiguous general clause instead |
How to Check Before Assuming You're in the Clear
- Read the entire lease, not just the section titled "Assignment" — change of control language sometimes appears under a separate heading, or buried in a broader "transfer" definition.
- Look for defined terms like "Change of Control," "Transfer," or "Reorganization" that might sweep in a share sale.
- Check the threshold. Some clauses trigger on any change in majority ownership; others are narrower, for example only a change affecting a named guarantor or principal.
- Confirm the consequence. Some clauses simply require notice; others require consent; a smaller number treat an unapproved change of control as a default.
- If a clause exists, build it into the deal timeline the same way you would landlord consent on an asset sale — as a closing condition with a realistic deadline.
Practical Takeaways for Buyers and Sellers
- Don't assume a share structure avoids the landlord entirely — the lease's actual wording decides that, not the general rule about assignment.
- If a change of control clause exists, treat the timeline the same way you would for an assignment: start early, don't leave it to the week before closing.
- A lease with no change of control language at all is genuinely less restrictive on this point, but confirm that by reading it, not by assuming it based on the deal structure.
- Where a change of control clause exists and is triggered, the landlord's leverage may be similar to, or in some leases greater than, what it would have in an assignment scenario — plan the negotiation accordingly.
Frequently asked questions
If the lease has no change of control clause, is a share sale completely free of landlord involvement?
Generally, yes, on the lease side specifically — though the landlord may still want to be informed as a courtesy, and other agreements, such as a guarantee, could still involve the landlord separately.
Does the Commercial Tenancies Act protect against unreasonable refusal under a change of control clause?
That statutory protection applies to assignment/subletting restrictions specifically. A separately drafted change of control clause is its own contractual term, and how it's enforced depends on its own wording rather than that statutory backstop.
Can a landlord terminate the lease over an unapproved change of control?
It depends entirely on what the clause says. Some leases treat it only as requiring notice or consent; others frame it as a default that could put the lease at risk if the requirement is ignored — which is exactly why the clause needs to be reviewed before closing, not after.
Is this different for a franchise agreement?
The same concept — a defined change of control clause overriding the general assumption that a share sale changes nothing — shows up in franchise agreements too, though the party doing the consenting is the franchisor rather than a landlord.
This is a business purchase or sale question
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