Asset Sale or Share Sale in Ontario?

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The two structures

When an incorporated business changes hands, the deal takes one of two basic shapes. In a share sale, the shareholders sell their shares to the buyer. The company itself does not change: it keeps its name, its bank accounts, its contracts, its employees, its registrations and everything in its past. Only its owners change. In an asset sale, the company sells some or all of its assets, such as equipment, inventory, customer lists, contracts and goodwill, and the buyer takes only what the agreement lists. The selling company stays behind with whatever was not sold, including its liabilities, unless the buyer agrees to take them on.

Buyers often prefer assets, because they can leave unknown liabilities behind. Sellers often prefer shares, because the whole company goes and nothing is left to wind up. The tax result usually differs between the two and can drive the decision, which is why your accountant should be involved from the first conversation. The steps of a deal, from letter of intent to closing, are on our buying or selling a business page.

Share sale and asset sale compared
Point	Share sale	Asset sale
Who sells	The shareholders	The company
What the buyer gets	The whole company, with its history	Only the listed assets, and only the liabilities it agrees to assume
Contracts and leases	Stay with the company; check change-of-control clauses	Must be assigned; many need the other party’s consent under their terms
Employees	Stay employed by the same company	If the buyer employs them, ESA s. 9 deems their employment continuous for ESA purposes
Shareholder approval	Transfers need the approvals in the articles or agreement	Selling all or substantially all property outside the ordinary course needs a special resolution (OBCA s. 184(3), (7))
Dissent rights	Not under s. 185	Shareholders entitled to vote may dissent and be paid fair value (OBCA s. 185(1)(e))
Corporate records after closing	Securities register, transfer register and significant control register updated; director changes filed	The seller company continues; the buyer’s company records the acquisition
Business name	Stays with the company	Transferred as an asset; the buyer registers it for its own use
Tax	Different treatment from an asset sale; ask your accountant	Different treatment from a share sale; ask your accountant

How each kind of deal closes, step by step

A share sale

Check the transfer rules. Private company articles usually restrict share transfers; Ontario’s standard incorporation text requires approval by the directors or a majority of the shareholders. A shareholders’ agreement may add rights of first refusal or, if it is a unanimous shareholder agreement, bind the buyer under section 108(8) of the OBCA.
Sign the share purchase agreement setting out the price, the representations each side makes, and what happens if a representation turns out to be untrue.
Approve and record the transfer. The directors or shareholders approve it, and the company records it in its securities register and register of transfers under section 141.
Update significant control. Under section 140.2(4), the company records the change in its register of individuals with significant control within 15 days after becoming aware of it. The register is explained in what is the register of individuals with significant control.
Change the board. The sellers resign as directors and officers, the buyer’s people are appointed, and a notice of change is filed within 15 days under section 4 of the Corporations Information Act.

An asset sale

List the assets and liabilities. The asset purchase agreement says exactly what is sold and which obligations, if any, the buyer takes on.
Get shareholder approval if needed. Under section 184(3), selling all or substantially all of a company’s property other than in the ordinary course of business requires shareholder approval. The notice of meeting must include a copy or summary of the agreement and a statement about dissent rights (section 184(4)), and the approval takes effect on a special resolution of each class entitled to vote (section 184(7)).
Assign contracts and leases. Each contract the buyer wants has to be transferred, and many require the other party’s consent.
Deal with employees. The buyer decides whom to hire, on what terms, and the seller deals with those who are not hired.
Transfer title and close. Bills of sale and assignments are signed, the price is paid, and the seller company is left with the proceeds and any remaining obligations.

What changes the answer

Employees

Section 9(1) of the Employment Standards Act, 2000 says that if an employer sells a business or part of it and the purchaser employs an employee of the seller, the employment is deemed not to have been terminated or severed for the purposes of the Act, and the time with the seller counts as time with the purchaser. Section 9(2) says this does not apply if the purchaser hires the employee more than 13 weeks after the earlier of their last day with the seller and the day of the sale. In a share sale the employer does not change at all, so employment simply continues.

Non-competes from the seller

Ontario generally bans non-compete agreements between employers and employees, but section 67.2(3) of the Act makes an exception where, as part of a sale of a business, the buyer and seller agree that the seller will not compete and the seller immediately becomes the buyer’s employee. We explain the rule and its limits in are non-compete clauses enforceable in Ontario.

Liabilities you cannot see yet

In a share sale the buyer inherits everything the company did, known or not, so the review before signing carries more weight, along with the seller’s promises and any holdback or indemnity. The review itself is covered in what happens in due diligence.

The state of the company’s records

A share buyer is buying the company’s history, and the minute book is the evidence of who owns the shares and what was approved. Gaps often have to be fixed before closing, as set out in what goes in an Ontario corporation’s minute book.

Tax

The tax consequences of the two structures are usually different for both sides, and they often decide which structure is used. That is a question for your accountant. The Canada Revenue Agency’s corporations pages set out each company’s own filing and payment obligations; this page gives no tax advice.

The seller’s own plans

For an owner, a sale also changes the estate plan: shares become cash, or the company becomes a holder of sale proceeds. Our page on estate planning for business owners covers what to update.

Example

For example, imagine Kim, who owns all the shares of a bakery company in Newmarket with six employees, and a buyer, Luis. Luis does not want to take on the company’s history, so they agree an asset sale: equipment, recipes, the business name, the lease and goodwill. Because these are substantially all of the company’s property and the sale is outside the ordinary course, Kim, as the only shareholder, signs a special resolution approving it under section 184.

The landlord consents to the lease assignment. Luis’s company hires five of the six employees on the closing date, so under section 9 of the Employment Standards Act their employment is continuous and their years with Kim’s company count with his. Kim’s company deals with the sixth employee’s entitlements. Luis also wants Kim to stay on for six months as a paid manager and not to open a competing bakery nearby. Whether that promise fits the sale-of-business exception in section 67.2(3) depends on who signs it as seller and on Kim becoming his employee immediately after the sale, so the wording is checked before closing. After closing, Kim’s company holds the sale proceeds, and her accountant advises on what happens next.

Common mistakes

Choosing the structure before the tax advice. The tax result can change which structure is better for both sides.
Forgetting third-party consents. A key lease or supply contract that cannot be assigned can stall an asset deal.
Missing shareholder approval. Selling substantially all the assets needs a special resolution, even in a small company.
Assuming employees start fresh after an asset sale. If the buyer hires them, their service usually continues under the ESA.
Buying shares without reading the minute book. In a share deal, every past decision comes with the company.
Leaving records unchanged after a share sale. Registers, significant control and director filings all need updating.

What to do this week

Ask your accountant to compare the tax result of a share sale and an asset sale for your situation.
List the contracts and leases the business depends on, and check each for assignment or change-of-control clauses.
List the employees, their start dates and their terms.
Check the minute book, registers and shareholders’ agreement for gaps or transfer restrictions.
Decide whether you, or the seller, should stay on after closing, and on what terms.
Read the deal steps on our buying or selling section of the corporate law page.
Before you sign a letter of intent, a first consultation takes 30 minutes, by video or in person, and you can request one here.
If the seller company will have nothing left after an asset sale, read how to dissolve an Ontario corporation.

Frequently asked questions

Which is better for a seller, an asset sale or a share sale?

Neither is better in general. Sellers often prefer a share sale because the whole company goes, but the tax result and what the buyer will accept usually decide it. Ask your accountant before you agree a structure.

Do employees have to agree to an asset sale?

The sale itself does not need their agreement, but the buyer is not obliged to hire them, and those who move go to a new employer. If the buyer employs them, section 9 of the Employment Standards Act treats their employment as continuous for the purposes of that Act.

Does a share sale need shareholder approval?

The selling shareholders agree by selling, and the transfer needs whatever approvals the articles and any shareholders’ agreement require. The special resolution in section 184(3) applies to a company selling all or substantially all of its property, which is an asset sale.

What happens to the business name in an asset sale?

It is one of the assets. If the buyer’s company will trade under it, the buyer registers it under the Business Names Act, as explained in numbered company or named company.

Can a buyer take over only part of the company’s debts?

In an asset sale, yes: the agreement lists the liabilities the buyer assumes, and the rest stay with the seller’s company. In a share sale the company keeps all its debts, so the buyer relies on the price, the seller’s promises and any indemnity.

Can the sale be challenged by a minority shareholder?

In an asset sale of substantially all property, a shareholder entitled to vote can dissent and be paid fair value under section 185. A dispute beyond that needs separate advice.

Sources

This page is general information about Ontario law, not legal advice for your situation. It reflects the law as of October 26, 2026.

Asset sale or share sale when you sell an Ontario business