A share purchase agreement is not paperwork at the end of a deal. It is the deal. The price you shook hands on is only a starting number. What you end up paying, and what you can do about a problem found six months later, is decided by clauses most buyers skim.
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The operative clause is short. The seller sells all the shares of a named class, free of any security interest, and the buyer pays. Everything else exists to make that sentence safe. Conditions say what must be true before either side is forced to close. Representations describe the company the buyer thinks it is buying. The indemnity says who pays when a representation turns out to be wrong. Restrictive covenants stop the seller from rebuilding the same business across the street six months later.
On a private Ontario corporation the shares almost always carry transfer restrictions in the articles, so the directors have to approve the transfer by resolution before it takes effect. If there is a shareholders' agreement, read it before you sign anything. Rights of first refusal, drag-along and tag-along rights can pull other shareholders into the deal or block it outright. Those are dealt with by waivers and consents delivered at closing, and they take time to collect.
The agreement should also name what is not being sold. A personal vehicle, a shareholder loan, a life insurance policy, real estate sitting inside the corporation. If the buyer is not paying for it, it comes out before closing, and the agreement says how, when, and at whose tax cost.
Most private Ontario deals price on a debt-free, cash-free basis. The headline number assumes the company closes with no bank debt, no surplus cash and a normal level of working capital, and the agreement then adjusts for the real figures. Get the definitions of debt, cash and working capital right. Every ambiguity in those definitions is money someone will argue about after closing, when leverage has already shifted.
Almost no price is paid in one piece. Expect a holdback or escrow standing behind the indemnity, often a vendor take-back note, and where the parties cannot agree on value, an earnout tied to future results. Earnouts need drafting discipline — who runs the business, which accounting policies apply, what happens if the buyer changes the sales model — or they become the dispute the deal was meant to avoid.
Say plainly how and when money moves. A funds flow statement, a signed direction as to funds, and wire instructions confirmed by telephone rather than by email. Fraud on closings in Ontario runs through changed wire instructions far more often than through the contract.
Survival periods are enforceable here in a way they are not in consumer contracts. The Limitations Act, 2002 normally overrides an agreement that tries to change a limitation period, but section 22(5) lets parties to a business agreement — one where none of the parties is a consumer — vary or exclude the basic two-year period. That is why a share purchase agreement can say the general representations live for a fixed period and then stop. Draft it loosely and you either lose a claim early or leave the seller exposed for years.
Employees do not move in a share deal, because their employer never changes. Nothing is re-hired and service dates simply continue. What does move is control, so read every change-of-control clause in the leases, the bank facility, franchise and supply agreements and any regulatory licence. A share sale can trigger a consent requirement even though the corporation remains the same legal person.
If the seller is not resident in Canada, the buyer generally has a withholding obligation on the purchase of taxable Canadian property and will want a clearance certificate under section 116 of the Income Tax Act. That process is not quick. Raise it at the letter of intent stage, not the week before closing.
Two filings get forgotten. Changes to directors, officers and the registered office must be filed under the Corporations Information Act within 15 days of the change. And since 1 January 2023 a private Ontario corporation must maintain a register of individuals with significant control under section 140.2 of the Business Corporations Act, so the new owner's details go into it.
The rest is housekeeping that protects the buyer's title: cancelled and reissued share certificates, an updated securities register, resignations and releases from the outgoing directors and officers, new bank signing authorities, and the post-closing working capital statement on the timetable the agreement sets.
Yes, and arguably more so. Friendly deals are where nothing gets written down and everyone remembers the conversation differently. The agreement is not a sign of distrust — it is the record of what was assumed about the company's tax position, its contracts and its debts. It also decides who pays if the CRA reassesses a year that closed before the sale. A short, plainly drafted agreement is fine. No agreement is not.
On small deals they are usually the same day: everyone signs, money moves, done. They are split when something has to happen first — a landlord's consent, a bank payout, a regulatory approval, a shareholder vote. If they are split, the agreement has to say what happens in between: what the seller may and may not do with the business, whether the representations are repeated at closing, and who can walk away if something changes.
There is no fixed answer, but the structure is standard. General business representations survive for a defined period after closing. Title to the shares, capacity and authority — the fundamental ones — survive much longer or without limit. Tax representations are usually tied to the period during which the CRA can reassess the pre-closing years. Because none of the parties is a consumer, the Limitations Act, 2002 permits these periods to be set by contract.
You can, and it will look convincing right up to the moment it matters. The parts templates get wrong are the ones with money attached: the working capital definition, the indemnity cap and basket, the survival periods, the knowledge qualifier, and whether the agreement is governed by Ontario law. A US template will also carry concepts that do not fit here. We work from a single flat fee of $3,388.87, taxes included, so the cost is known before you start.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.