Transferring Shares in an Ontario Private Company

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What a share transfer involves

A share transfer moves existing shares from one owner to another. It is different from an issue of new shares, where the corporation itself creates shares and receives the price, which we cover in how shares are issued. In a transfer, the corporation receives nothing; the seller does. The corporation’s role is to check that the transfer is allowed and to record the new owner.

In a private company, a transfer can arise in many ways. It might be a partner leaving, a parent bringing a child into the business, a buyer taking over the whole company, or a shareholder’s estate passing shares to heirs. The rules come from five places: the corporation’s own articles and by-laws, any shareholders’ agreement, Ontario’s Business Corporations Act (OBCA) and Securities Transfer Act, 2006, securities law, and federal tax law. This page supports our main corporate law page.

How a transfer works, step by step

Read the restrictions. Check whether the articles restrict share transfers, for example by requiring the directors’ consent; the private issuer exemption discussed below depends on such restrictions. A shareholders’ agreement may add a right of first refusal, a buy-sell or shotgun clause, or a ban on transfers to outsiders; we explain those in buy-sell and shotgun clauses. A buyer of shares subject to a unanimous shareholder agreement is deemed to be a party to it under section 108(4) of the OBCA.
Agree the terms in writing. For a sale, a share purchase agreement sets the price, what the seller promises about the company, and what happens on closing. For a gift within a family, a simpler written transfer may be enough.
Get the approvals. Directors pass a resolution approving the transfer where the articles require it; shareholders consent where the agreement requires that.
Deliver the certificate or instruction. If the shares are certificated, the seller endorses and delivers the certificate. If they are uncertificated, which section 54(1) of the OBCA allows, the transfer is made by instruction to the corporation.
Register the transfer. Section 141(2) of the OBCA requires a register of transfers recording every transfer with its date and particulars, and section 141(1) requires the securities register to show current and recent shareholders and their holdings.
Issue the new certificate or notice. For uncertificated shares, section 54(3) requires the corporation to send the new registered owner a written notice with the information a certificate would carry, within a reasonable time.
Update the other registers. If the transfer changes who has significant control, section 140.2(4) requires the corporation to update its register of individuals with significant control within 15 days after becoming aware of the change.

The legal checkpoints in an Ontario private share transfer
Checkpoint	What the law says	Source
Transfer restrictions	A restriction imposed by the corporation is ineffective against a person who did not know of it unless it is noted conspicuously on the certificate, or notice was given for uncertificated shares	Securities Transfer Act, 2006 s. 62
Duty to register	The corporation must register a transfer when the conditions in s. 86(1) are met, including that it does not breach a valid restriction	Securities Transfer Act, 2006 s. 86
Who the corporation deals with	Until a transfer is presented for registration, the corporation may treat the registered owner as the person entitled to vote and receive dividends	Securities Transfer Act, 2006 s. 64; OBCA s. 67(1)
Corporation’s lien	The articles, by-laws or a unanimous shareholder agreement can give the corporation a lien on a shareholder’s shares for a debt owed to it	OBCA s. 40(1)
Register of transfers and securities register	Every transfer recorded with its date and particulars; shareholders shown for six years	OBCA s. 141(1) and (2)
Significant control register	Updated within 15 days after the corporation becomes aware of new information	OBCA s. 140.2(4)
Non-arm’s length price	A sale below fair market value to a person the seller does not deal with at arm’s length, or a gift to anyone, is treated, for the seller, as made at fair market value	Income Tax Act s. 69(1)(b)
Non-resident seller	If the shares are taxable Canadian property, a buyer who does not get the required certificate can be liable to remit 25 per cent of the amount the Act sets	Income Tax Act s. 116(5)

What changes the answer

The restrictions are not on the certificate

Section 56(8) of the OBCA requires a restriction on transfer imposed for certain purposes in the articles to be noted conspicuously on every share certificate. Section 62 of the Securities Transfer Act, 2006 goes further: a restriction imposed by the issuer is ineffective against a person without knowledge of it unless it is noted conspicuously on the certificate (or, for uncertificated shares, notice was given). If a certificate lacks the legend, a buyer who did not know of the restriction may take the shares free of it, which is why the certificates and minute book need checking before any sale.

The buyer is outside the family and the company

Securities law can also apply to a sale of private company shares, because selling securities can require a prospectus unless an exemption applies. National Instrument 45-106 defines a “private issuer“: a company that is not a reporting issuer, whose securities are subject to transfer restrictions in its constating documents or security holders’ agreements, and are owned by no more than 50 people, not counting employees and former employees. The Instrument’s own private issuer exemption in section 2.4(2) does not apply in Ontario (section 2.4(5)). In Ontario, the Instrument notes that section 73.4(2) of the Securities Act provides a similar exemption, and section 2.4(2.1) lists the buyers it covers, such as directors, officers, employees and founders, their close family, close personal friends and close business associates, existing security holders, accredited investors and persons who are not the public. If the buyer fits none of those groups, the deal needs securities advice before it is signed.

Family transfers and tax

Moving shares to a family member raises tax questions as well as corporate ones. Except where the Act expressly provides otherwise, section 69(1)(b) of the Income Tax Act treats a gift, or a sale to a non-arm’s length person for less than fair market value, as if the seller received fair market value. Section 69(1)(a) treats a purchase from a non-arm’s length person above fair market value as made at fair market value. A transfer at the wrong price can therefore create tax with no cash to pay it. Our page on bringing family members into your company covers the corporate side, and your accountant should set the tax structure.

A non-resident seller

Where the seller is not resident in Canada and the shares are taxable Canadian property, section 116(3) of the Income Tax Act requires the seller to send notice to the CRA within 10 days after the sale, and the CRA can issue a certificate for the sale. Section 116(5) makes a buyer who acquires without that certificate, and without other protection the section allows, liable to remit 25 per cent of the amount it specifies within 30 days after the end of the month of the purchase. Whether private company shares are taxable Canadian property depends on what the company owns, so this needs checking early.

The shareholder has died

When a shareholder dies, the shares pass to the estate, not straight to the heirs. Section 67(2) of the OBCA requires a corporation whose articles or unanimous shareholder agreement restrict transfers to treat the personal representative as the registered holder once they provide evidence under section 87 of the Securities Transfer Act, 2006. Whether the estate needs probate to deal with the shares depends on the company and the estate plan, which we cover in secondary wills for private company shares and estate planning for business owners.

The whole company is changing hands

When a buyer takes every share, the transfer is a share sale of the business, with due diligence, a purchase agreement and closing steps. We compare it with an asset sale in asset sale or share sale and walk through due diligence when buying a business.

Example

For example, imagine an Ontario corporation that runs two restaurants in Markham, owned 60 per cent by Kevin and 40 per cent by his former business partner, Tom, who wants out. The articles say no share can be transferred without the directors’ approval, and a shareholders’ agreement gives Kevin a right of first refusal.

Tom offers his shares to Kevin at a price set by the agreement’s valuation clause, and Kevin accepts. They sign a share purchase agreement. The directors pass a resolution approving the transfer. Tom endorses and delivers his share certificate, and the corporation records the transfer in its register of transfers, updates the securities register, cancels Tom’s certificate and issues a new one to Kevin. Because Kevin now has 100 per cent, the corporation updates its register of individuals with significant control within 15 days. Tom resigns as a director, and the corporation files the change with the Ontario Business Registry. Both sides take tax advice on the price. This example is hypothetical and is not legal advice.

Common mistakes in share transfers

Treating a handshake as a transfer. Until the transfer is presented and registered, the corporation may keep treating the seller as the owner.
Skipping the approvals the articles require. The corporation has no duty to register a transfer that breaches a valid restriction.
Forgetting the registers. The register of transfers, the securities register and the significant control register all need updating.
Gifting shares to family at a nominal price. The Income Tax Act can treat the seller as having received fair market value.
Ignoring a non-resident seller. The buyer can end up paying part of the seller’s tax.
Not reading the shareholders’ agreement. Rights of first refusal and buy-sell clauses can override a deal already shaken on.

What to do this week

Pull the articles, by-laws and any shareholders’ agreement, and note every transfer restriction.
Check the current securities register and the share certificates against each other.
Confirm whether the buyer is an existing shareholder, a family member, an employee or an outsider.
Ask the seller where they are resident for tax purposes.
Agree the price with an accountant’s input, especially for a family transfer.
Book a review of the documents before anyone signs. A first consultation takes 30 minutes, by video or in person, and you can request one here.

Frequently asked questions

Do share transfers have to be filed with the government in Ontario?

The corporation records the transfer in its own registers under section 141 of the OBCA. A change of directors or officers that comes with the transfer is reported to the Ontario Business Registry, which we cover in annual filings for an Ontario corporation.

Can the directors refuse to register a transfer?

Where the articles require their approval, yes. Where the conditions in section 86(1) of the Securities Transfer Act, 2006 are met, the corporation must register the transfer and can be liable for unreasonable delay.

Can I transfer shares to my holding company?

It can be done, subject to the same restrictions and approvals. The tax treatment of a transfer to your own company is a separate question for your accountant; see our page on holding companies.

What if the share certificate is lost?

Section 92 of the Securities Transfer Act, 2006 requires the corporation to issue a new certificate if the owner asks before the corporation has notice that a protected purchaser has acquired the old one, provides an indemnity bond sufficient in the corporation’s judgment, and meets any other reasonable requirements. Under section 93, an owner who does not notify the corporation of the loss within a reasonable time can lose those claims if the corporation registers a transfer before it hears of the loss.

Do the shares need to be valued?

Between strangers, the price is whatever they agree. Between people who do not deal at arm’s length, and for any gift, the Income Tax Act looks at fair market value, so a valuation can be worth the cost.

Is a transfer of shares the same as selling the business?

Selling all the shares is one way to sell a business; the company keeps its assets, contracts and liabilities. Selling the assets is the other.

Sources

This page is general information about Ontario law, not legal advice for your situation. It reflects the law as of November 9, 2026.

How do you transfer shares in an Ontario private company?