A Canadian Share Purchase Agreement is a legally binding contract between a vendor (seller) and a purchaser (buyer) for the sale and transfer of shares in the capital of a Canadian corporation. Unlike an asset purchase agreement where the buyer acquires specific business assets, a share purchase agreement transfers ownership of the corporate entity itself, including all of its assets, liabilities, contracts, permits, intellectual property, and obligations. The purchaser effectively steps into the position of the departing shareholder.

Share purchase transactions in Canada are governed by the applicable business corporations legislation. Federally incorporated corporations are subject to the Canada Business Corporations Act (R.S.C. 1985, c. C-44) (CBCA), which establishes the framework for share issuance, transfer, and corporate governance. Provincially incorporated corporations are governed by their respective provincial legislation: the Business Corporations Act (Ontario) (R.S.O. 1990, c. B.16), the Business Corporations Act (British Columbia) (S.B.C. 2002, c. 57), the Business Corporations Act (Alberta) (R.S.A. 2000, c. B-9), the Business Corporations Act (Saskatchewan) (R.S.S. 1978, c. B-10), the Corporations Act (Manitoba) (C.C.S.M., c. C225), or the Business Corporations Act of the applicable province.

Securities regulation is a critical consideration in Canadian share purchase transactions. Unlike the United States, where securities regulation is primarily federal, Canadian securities regulation is administered by each province and territory through its own Securities Act and securities commission. The Canadian Securities Administrators (CSA) coordinate regulation through national instruments such as National Instrument 45-106 (Prospectus Exemptions), which establishes the exemptions most commonly relied upon in private share transactions, including the private issuer exemption, the accredited investor exemption, the family, friends, and business associates exemption, and the minimum amount investment exemption.

The Income Tax Act (R.S.C. 1985, c. 1 (5th Supp.)) governs the tax treatment of share sales. A disposition of shares may result in a capital gain or capital loss for the vendor. The taxable portion of a capital gain is included in the vendor's income at the applicable inclusion rate. If the shares qualify as qualified small business corporation (QSBC) shares under section 110.6 of the Income Tax Act, the vendor may claim the lifetime capital gains exemption, which provides significant tax relief for Canadian-controlled private corporation shareholders. The purchaser and vendor may also jointly elect under section 85 of the Income Tax Act to effect a tax-deferred rollover, which allows the vendor to defer recognition of the capital gain by transferring the shares to a corporation at an elected amount equal to or greater than the adjusted cost base.

A Share Purchase Agreement is needed whenever shares in a Canadian private corporation change hands, whether through a negotiated sale, a corporate reorganisation, an estate transfer, or a shareholder buyout. The agreement protects both the vendor and the purchaser by establishing clear terms for the transfer, documenting representations and warranties about the corporation and its shares, and providing remedies in the event of a breach.

Shareholders of closely held corporations need this agreement when a departing shareholder sells their interest to a remaining shareholder, a new investor, or an outside buyer. The agreement must address any existing unanimous shareholder agreement (USA) restrictions, rights of first refusal, shotgun clauses, and board approval requirements under the corporation's articles or bylaws.

Business succession planning frequently involves share purchase agreements where a founder or controlling shareholder transfers ownership to family members, key employees, or a management buyout group over time. The agreement may be structured with vendor financing, instalment payments, or an earn-out mechanism tied to the corporation's future performance.

Corporate reorganisations under the Income Tax Act, including section 85 rollovers, section 86 share exchanges, and section 87 amalgamations, require share purchase or share exchange agreements to document the transaction and support the tax elections filed with the Canada Revenue Agency.

Investors acquiring minority interests in private corporations need this agreement to establish the price per share, transfer restrictions, governance rights, anti-dilution protections, and exit mechanisms such as drag-along and tag-along rights.

Estate trustees and personal representatives administering the estate of a deceased shareholder need this agreement when selling the deceased's shares to surviving shareholders or third parties, particularly when a buy-sell agreement funded by life insurance triggers upon the shareholder's death.

Without a properly drafted Share Purchase Agreement, purchasers risk acquiring shares encumbered by undisclosed transfer restrictions, inheriting corporate liabilities that exceed the value of the business, or failing to comply with provincial securities law exemption requirements, which could result in statutory rescission rights for the purchaser.

Share Identification -- The exact number and class of shares being sold (common shares, preferred shares, Class A shares, etc.), the corporation's full legal name, the jurisdiction of incorporation (federal under the CBCA or provincial), the corporation number, and confirmation that the shares are fully paid and non-assessable. If the shares are certificated, include the certificate numbers. If the corporation has multiple classes of shares, describe the rights, privileges, restrictions, and conditions attached to the class being sold.

Purchase Price and Payment -- The total purchase price in Canadian dollars, the price per share (if applicable), the payment method (wire transfer, certified cheque, bank draft, or solicitor's trust cheque), and the payment schedule. If the purchase price includes contingent consideration such as an earn-out, specify the performance metrics, measurement period, and dispute resolution mechanism for earn-out calculations.

Vendor Representations and Warranties -- The vendor must represent that they are the registered and beneficial owner of the shares with full power and authority to sell and transfer them; that the shares are free and clear of all liens, charges, encumbrances, and adverse claims; that the corporation is duly incorporated and in good standing; that the execution of the agreement does not breach any contract, unanimous shareholder agreement, or instrument; that there are no pending or threatened legal proceedings; and that the corporation has filed all required tax returns with the Canada Revenue Agency and paid all taxes owing.

Purchaser Representations -- The purchaser must represent that they have the capacity to enter into the agreement, that they are purchasing the shares as principal, and that the transaction is exempt from prospectus requirements under the applicable provincial Securities Act and National Instrument 45-106.

Tax Matters -- Address the income tax consequences under the Income Tax Act, including capital gains treatment, the lifetime capital gains exemption for QSBC shares, the potential for a section 85 rollover election, and any withholding tax obligations if the vendor is a non-resident of Canada under section 116.

Transfer Restrictions -- Identify any restrictions on the transfer of shares under the corporation's articles, bylaws, or any unanimous shareholder agreement. Confirm that all required approvals, consents, and waivers (including board of directors approval and waiver of any rights of first refusal) have been or will be obtained prior to closing.

Closing Deliverables -- The vendor's obligation to deliver share certificates endorsed for transfer or accompanied by executed stock transfer powers, a board resolution approving the transfer, a direction to the corporation's transfer agent to record the transfer in the securities register, and any other documents required to complete the transfer.

Governing Law -- The province whose Business Corporations Act, Securities Act, and common law or civil law (in Quebec) govern the agreement, and the courts with exclusive jurisdiction over disputes.