Share & Asset Purchase Lawyer in Mississauga

A side-by-side comparison

• What is acquired. Share deal: the corporation, entire and unchanged. Asset deal: only the assets listed in the agreement.
• Liabilities. Share deal: all of them, disclosed or not. Asset deal: only those expressly assumed, subject to statutory exceptions such as ESA continuity and bulk sales considerations.
• Contracts. Share deal: continue automatically, unless a change-of-control clause is triggered. Asset deal: each must be assigned, and most require counterparty consent.
• Tax to the seller. Share deal: capital gain, potentially sheltered by the lifetime capital gains exemption. Asset deal: recapture, income, and capital gains in the corporation, then a second layer of tax when funds are distributed.
• Tax to the buyer. Share deal: inherits the existing cost base. Asset deal: cost base stepped up to the purchase price, improving future depreciation.
• Employees. Share deal: unaffected. Asset deal: technically terminated and rehired, with ESA service continuity preserved.
• Complexity. Share deal: heavier diligence. Asset deal: heavier closing mechanics, with each asset transferred and each consent obtained.

Hybrid structures

The choice is not always binary. Where a seller needs share-sale tax treatment and a buyer needs asset-sale protection, structures exist to move part of the way, a pre-closing reorganisation to strip out unwanted assets or liabilities, a section 85 rollover, or a hybrid sale of some shares and some assets.

These need to be planned with the accountants early. Attempting them late usually means accepting a worse result because the timing tests cannot be met.

Closing mechanics

On a share deal, closing is comparatively tidy: share transfers endorsed, resignations and replacement appointments for directors and officers, updated registers, releases, and the funds flow.

On an asset deal, every category of asset moves under its own instrument, a bill of sale for the tangible property, assignments of each contract and lease with consents attached, assignments of intellectual property registered where applicable, PPSA discharges for security being released, and the transfer of permits and licences that can be transferred. Where a property is involved, the land transfer registers alongside it.

Closings now run predominantly through electronic document exchange and wire transfer, but the sequencing still has to be right: consents in hand, discharges arranged, and funds released against registration rather than on a promise.