Reviewed by Karim Eshqoor, Lawyer, Barbarian Law® (LSO #83032R)
Every Ontario business acquisition hits the same fork: buy the corporation’s shares, or buy selected assets. Shares usually suit sellers (a clean exit, liabilities included); assets usually suit buyers (pick what you take, leave the liabilities behind). Structure is the negotiation — decide it before the letter of intent hardens.
Every business acquisition starts at the same fork in the road, usually before anyone has drafted a word: are you buying the shares of the corporation, or its assets?
It sounds like a technicality. It’s the opposite. The answer changes which liabilities follow the business, what happens to employees and contracts, and often the price itself. Buyers and sellers usually want opposite answers — which is why the structure is the negotiation.
Barbarian Law® structures and closes share and asset purchases across York Region and the GTA — LOIs, diligence, purchase agreements, and the licensing and lease consents that come with them. Corporate · Commercial · Fees · Contact.
What is the difference between a share purchase and an asset purchase?
Share purchase: you buy the corporation itself. Every share changes hands and the company keeps operating exactly as before — same contracts, same licences, same bank accounts, same history. You’ve bought the container and everything in it, known and unknown.
Asset purchase: the corporation sells you its stuff — equipment, inventory, customer lists, goodwill, the lease, the name — and you run the business through your own entity. The seller keeps the old corporation, and its skeletons, and winds it up or doesn’t.
| Share purchase | Asset purchase | |
|---|---|---|
| What changes hands | The corporation itself | Selected assets only |
| Liabilities | Follow the business | Mostly stay behind |
| Contracts | Stay in place — watch change-of-control | Must be assigned; consents required |
| Employees | Continue seamlessly | Service carries over anyway (ESA successor) |
| Typically favours | Seller | Buyer |
Why do sellers prefer a share sale?
The money is different too. The two structures are taxed very differently for the seller, and that difference often drives the price. It is your accountant’s number to calculate, not ours; get it before you agree the structure, and negotiate structure and price together.
A clean exit. Sell the shares and everything goes, liabilities included. The seller walks away — subject to the indemnities they sign.
Why do buyers prefer an asset purchase?
You leave the skeletons. Buy shares and you inherit the corporation’s entire history: reassessments, undisclosed debts, lawsuits nobody mentioned, warranty claims on products sold years ago. Buy assets and — with important exceptions — the liabilities stay with the seller’s corporation.
You pick and choose. Take the equipment and the brand; leave the mouldy lease and the money-losing division.
What exceptions decide real deals?
Employees. In an Ontario asset deal, employment standards law treats the buyer as a successor: hire the seller’s employees and their years of service carry over for termination and severance purposes. You cannot buy the workforce fresh. Long-service employees are a real, priceable liability under either structure — diligence them like debt.
Contracts and leases. In a share deal, contracts stay with the corporation, but check for change-of-control clauses that let the other side walk. In an asset deal, every contract must be assigned, and most leases and key contracts require consent — which means the landlord and your major customers effectively get a seat at your closing. See commercial lease red flags.
Licences and franchises. Regulatory approvals rarely move like furniture. Liquor licences, cannabis authorizations, and franchise agreements each have their own transfer or consent regime — and even share deals can trigger regulatory notification when control changes. Build the deal timeline around the regulator’s timeline, not the other way around.
How much due diligence does each structure need?
Buy assets and diligence focuses on what you’re acquiring: title to equipment, the lease, the contracts, the employees. Buy shares and you must diligence everything the corporation has ever done, because you’re buying all of it.
That’s why share deals lean so heavily on representations, warranties, indemnities, and holdbacks: the contract has to cover what diligence can’t see. A seller whose minute book is a mess — the same clean-up flagged in multiple wills — will feel it here, in delay, in price, or both. Equal partners? Don’t forget the shareholder agreement.
What goes into the purchase agreement?
A share purchase agreement buys the company whole, so most of its length is promises about the past: representations and warranties on the company’s contracts, debts, employees and records, indemnities if those promises turn out to be wrong, and a holdback or escrow so the buyer has something to claim against. An asset purchase agreement buys a list, so most of its length is the list: schedules of exactly what is included and what stays behind, the leases and contracts being assigned and the consents each one needs, the employees the buyer will hire, and the seller’s transition and non-competition promises.
Same deal, different document. The structure decides which one you are negotiating.
How much does a lawyer cost to buy or sell a business?
Deal fees at Barbarian Law®
| Service | Price |
|---|---|
| Business purchase or sale under $1 million, agreement review | $1,500 + HST |
| Business purchase or sale under $1 million, full deal (asset or share) | From $5,000 + HST |
| Deals over $1 million, or with real estate or financing | $350/hour + HST |
| Ontario incorporation, numbered company (incl. the $300 government filing fee, which carries no HST) | $1,000 + HST |
| Ontario incorporation, named company (incl. the $300 government filing fee, which carries no HST, and the NUANS search) | $1,250 + HST |
| Dye & Durham filing fee, every incorporation, no HST | $125 |
| Independent legal advice | $500 + HST |
Prices exclude HST and disbursements. Hourly work is billed against a written estimate you approve before work begins.
Frequently asked questions
Do employees transfer in an asset sale?
The buyer chooses whom to hire, but under Ontario’s Employment Standards Act employees who are hired keep their service for many purposes. Plan severance and offers early.
What is a share purchase agreement?
The contract to buy the shares of a corporation. It sets the price and how it is paid, the seller’s representations and warranties about the company’s history, the indemnities and any holdback behind them, and the closing conditions, such as third-party consents and financing.
What is an asset purchase agreement?
The contract to buy specific assets of a business. It lists what is included and excluded, assigns the leases and contracts with the consents they need, identifies the employees the buyer will hire, and sets the seller’s transition and non-competition obligations.
Which structure should I choose?
The one both sides can price. Buyers lean to assets to leave liabilities behind; sellers lean to shares for a clean exit. Decide it before the letter of intent is signed, with your accountant’s numbers in hand, and negotiate structure and price together.
The bottom line
There’s no universally right structure. There’s the right structure for this deal, priced accordingly. Sellers: get advice early and clean up the corporation before buyers look inside. Buyers: price the structure, not just the business — an asset deal at one number and a share deal at a lower number may be the same deal.
Buying or selling a business in Ontario? Contact Barbarian Law before the letter of intent is signed. That’s when structure is decided.
Where Art Meets Corporate Interest.
Get the structure right before it costs you.
Send what the business does and who the owners are. You get a written estimate before any work begins.
This article is general information about Ontario law, not legal advice, and reading it does not create a lawyer-client relationship. Every situation is different; speak with a lawyer about yours.
