Buying a Business: The Share Purchase Transaction

A business may be acquired in two ways – either through a share purchase or through an asset purchase. Read our article on asset purchase and sale here. 

In a share purchase transaction, the purchaser acquires all or a specified number of shares of the target company. By purchasing the shares, the ownership of the target company is transferred to the purchaser. Unlike an asset purchase where the purchaser has the option of handpicking the assets of the target company, the purchaser in a share purchase acquires both the assets and liabilities of the target company. Share purchase transactions falls within the realm of mergers and acquisitions(M&As). 

Share purchase transactions typically begin with the vendor and the purchaser entering into preliminary discussions about items such as the purchase price, payment schedules, financing, important terms and conditions, closing date, leases etc. The parties then proceed to document their discussions and understanding in a non-binding letter of intent (“LOI”’).

As soon as reasonably practicable after the execution of the LOI, the parties commence negotiating a binding and definitive share purchase agreement(“SPA”). Share purchase transactions has inherent complexities and at this point, each party should obtain legal representation. The legal counsel for each party represents them in negotiating and drafting a definitive SPA. 

Due diligence investigations (“DD”) are an important aspect of a share purchase transaction; it involves both the purchaser’s lawyer and financial advisers. Before DD investigations, legal representatives of the target company will require the purchaser to sign a non-disclosure agreement (“NDA”). During the DD investigation, the purchaser’s lawyer will:

  • Review the contracts of the target company
  • Carry out public record searches for registered security on corporate assets
  • Review all corporate records of the target company
  • Review any litigation to which the target company is a party
  • Review the intellectual property owned by the target company

The parties’ lawyers ensure that all closing conditions are fulfilled or waived. The lawyers also represent the parties if financing is required and ensure that the parties understand the terms of the transaction. If the target company operated its business out of leased premises, the lawyers request the landlord’s consent to the change of control of the corporation. 

Lawyers typically use closing agendas to itemize the closing documents that are to be exchanged between the purchaser and vendor on the closing date. The closing agenda serves as a transaction guide. A well-drafted closing agenda should show the status of each closing document and should be updated as the share purchase transaction progresses. Depending on the nature of the share purchase and sale, closing documents may include:

  1. Resolution of the Corporation authorizing the Share Purchase and transfer of shares
  2. Closing Day PPSA Search Against the Corporation and the Vendor
  3. Change of Control Consent from the Landlord 
  4. Resolution of the Purchaser authorizing the Share Purchase and Transfer
  5. Certificate of Incumbency 
  6. Certificate of Status 
  7. Resignation of the Vendor as Director and Officer of the Corporation 
  8. Releases
  9. Bring Down Certificates 
  10. Direction re Funds
  11. Receipt of Payment of Purchase Price
  12. Income Tax Act statutory declaration by the Vendor as to Canadian residency
  13. Income Tax Act statutory declaration by the Purchaser as to Canadian residency
  14. Non-Competition and Non-Solicitation Agreement 
  15. General Security Agreement
  16. Share Pledge Agreement
  17. PPSA Cancellation
  18. PPSA Registration
  19. Share Pledge Agreement 
  20. Escrow Agreement 
  21. Delivery of the Corporate Minute Book
  22. Statement of Adjustments
  23. Undertaking to adjust
  24. Cancelled Share Certificates
  25. Newly Issued Share Certificates

Buying and selling the shares of a corporation is a complex process.  An important step towards a successful share purchase and sale is to have the share purchase agreement negotiated and drafted by a competent and knowledgeable business lawyer. The business lawyers at Rabideau Law can be trusted to assist clients as they navigate the M&A process while protecting their interests.

Written by Jumi D. Odepe

Jumi is a corporate lawyer at Rabideau Law. She represents businesses and investors in the formation and structuring of business entities, buying and selling of businesses, reorganizations, and various contractual and service agreements. To reach her, call 519-957-1001 or email  

The blog published by Rabideau Law is intended as general information only and does not serve as legal advice. By viewing the blog posts, the reader understands that no solicitor-client relationship is established. Readers should consult the business lawyers at Rabideau Law for their legal questions and concerns.