To transfer a business corporation, a purchaser must acquire at least a majority of the issued and outstanding voting shares of the business. Such shares may belong to one or more owners who agree to sell their shares for consideration. This transfer could theoretically be evidenced by simply endorsing the share certificates representing a majority of such registered holders in favour of the new owner in exchange for the agreed payment. However, when the business being sold is a private issuer, common practice usually involves signing a share purchase agreement (which can be more or less detailed, depending on the wishes of the parties).

This template has been drafted specifically for when a corporation sells its shares to a person (who is not already a shareholder) and this sale results in control being transferred to this new shareholder. This template sets out the legal, financial and commercial framework for a share purchase agreement.

When using this template, it is important to take into consideration any laws that could affect the interpretation of certain clauses in this contract; for example, the law under which the corporation was incorporated (CBCA or QBCA), the Civil Code of Québec (concerning service agreements and mandates) and the applicable provisions of the Québec Securities Act and its regulations.

It is very important to determine whether a share purchase agreement is the appropriate legal instrument for your situation. A share purchase agreement is necessary in the following situations, namely:

a) when the parties to the sale wish to avoid the complications or risks associated with an asset purchase; an asset purchase may not be the most advantageous option, because some assets can be difficult to transfer or the cost of transferring them may be prohibitive; as such, a share purchase may be a better alternative; and

b) when the buy-sell process is initiated by a letter of intent (template Y04200), rather than a detailed offer to purchase shares (template Y04270) followed by a closing certificate (template Y04600).

0.00 INTERPRETATION
0.01 Definitions
0.01.01 Activities
0.01.02 Adverse Event
0.01.03 Affiliates
0.01.04 Agreement
0.01.05 Annual Budget
0.01.06 Articles
0.01.07 Breach
0.01.08 CBCA
0.01.09 Client
0.01.10 Closing Date
0.01.11 Collateral Agreement
0.01.12 Confidential Information
0.01.13 Control
0.01.14 Corporation
0.01.15 Creditors
0.01.16 Directors
0.01.17 Domain Name
0.01.18 Effective Date
0.01.19 Employees
0.01.20 Encumber or Encumbrance
0.01.21 Equipment
0.01.22 Escrow Agent
0.01.23 Escrow Agreement
0.01.24 Event of Default
0.01.25 Financial Statements
0.01.26 Force Majeure
0.01.27 Fully Diluted Basis
0.01.28 Hazardous Materials
0.01.29 ICT Assets
0.01.30 Immovable
0.01.31 Intellectual Property
0.01.32 Interim Period
0.01.33 Key Persons
0.01.34 Law
0.01.35 Lease
0.01.36 Legal Person
0.01.37 Legal Representatives
0.01.38 Loss
0.01.39 Offer
0.01.40 Operating Income
0.01.41 Ordinary Course of Business
0.01.42 PARTY
0.01.43 Person
0.01.44 Prime Rate
0.01.45 Products
0.01.46 QBCA
0.01.47 QSA
0.01.48 Related Person
0.01.49 Representative
0.01.50 Rolling Stock
0.01.51 Services
0.01.52 Shareholders' Equity
0.01.53 Subject Shares
0.01.54 Subsidiary
0.01.55 Suppliers
0.01.56 Taxes
0.01.57 Transaction
0.01.58 Transitional Period
0.01.59 Voting and Participating Shares
0.01.60 Year
0.02 Entire Agreement
0.03 Applicable Laws
0.04 Non-Compliance
0.04.01 Severability
0.04.02 Substitute Provision
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 No Waiver
0.05.03 Time and Days
a) Time of the Essence
b) Computation of Time
c) Delays
0.05.04 Financial References
0.05.05 Cross-References
0.05.06 Gender and Number
0.05.07 Headings
0.05.08 Presumptions
0.05.09 Knowledge
0.05.10 Approval
0.05.11 Accounting Standards
1.00 PURPOSE
1.01 Sale
1.02 Conditions
1.02.01 Required by VENDOR
1.02.02 Required by PURCHASER
1.02.03 Election
2.00 CONSIDERATION
2.01 Base Amount
2.02 Adjustment
2.02.01 Rationale
2.02.02 Calculation for Adjustment
a) Operating Income
b) Shareholders’ Equity
3.00 TERMS OF PAYMENT
3.01 Initial Instalment
3.02 Balance of Price
3.02.01 Monthly Instalments
a) Total Amount
b) Payment Schedule
c) Monthly Amounts
d) Interest
3.02.02 Post-dated Cheques
a) First Series
b) Second Series
3.03 Pre-Payment
3.04 Loss of Term
3.05 Adjustment
3.06 Reimbursement of Legal Costs
4.00 SECURITY
4.01 Placing Subject Shares in Escrow
4.02 Suretyship
4.02.01 Undertaking
4.02.02 Default
4.02.01 Intervention and Undertaking
a) Purpose
b) Default
c) Act or Omission by VENDOR
4.02.02 Amendments
4.02.03 Solidarily Liable
a) Undertaking
b) Recourse Against SURETY
c) Benefits of Division and Discussion
4.03 Immovable Hypothec
4.03.01 Undertaking
4.03.02 Impact of Suretyship
4.03.03 Assignment, Liquidation, Bankruptcy or Insolvency
a) Presumption
b) Effective Date of Suretyship
4.04 Jurisdiction
5.00 MUTUAL REPRESENTATIONS AND WARRANTIES
5.01 Status
5.02 Nominee
5.03 Authority
5.04 Binding Agreement
5.05 Canadian Resident
5.06 Canadian Status
5.07 Exempt Transaction
5.08 Commission
5.09 Disclosure
5.10 Informed Consent
6.00 REPRESENTATIONS AND WARRANTIES OF PURCHASER
6.01 Nominee
6.02 Authority
6.03 Binding Agreement
6.04 Canadian Resident
6.05 Canadian Status
6.06 Exempt Investor
6.07 Legal Advice
6.08 Disclosure
7.00 REPRESENTATIONS AND WARRANTIES OF VENDOR
7.01 Person
7.01.01 Status
7.01.02 Authority
7.01.03 Exempt Investor
7.01.04 Insolvency
7.01.05 Conduct
7.02 Subject Shares
7.02.01 Ownership
7.02.02 Encumbrances
7.02.03 Issuance
7.02.04 Assignability
7.02.05 Dividend
7.02.06 Dilution
7.03 Corporation
7.03.01 Status
7.03.02 Authorized and Issued Capital
7.03.03 Private Issuer
7.03.04 Books and Records
7.04 Shareholders
7.05 Compliance
7.05.01 Laws
7.05.02 Knowledge
7.06 Subsidiaries and Affiliates
7.06.01 Chart
7.06.02 Knowledge
7.07 Human Resources
7.07.01 Labour Standards
7.07.02 Occupational Health and Safety
7.07.03 Collective Bargaining Agreement
7.07.04 Undertakings of Corporation
7.07.05 Strike or Lock-out
7.07.06 Pay Equity
7.07.07 Key Persons
7.07.08 Resignation
7.08 Corporate Finance
7.08.01 Financing Instruments
7.08.02 Leasing Agreements
7.08.03 Adverse Event
7.08.04 No Breach
7.08.05 Due and Payable
7.09 Financial Management
7.09.01 Financial Statements
7.09.02 Financial Position
7.09.03 Suretyship and Security
7.09.04 Accounting Method
7.09.05 Advances
7.09.06 Release
7.10 Tax Matters
7.10.01 Income Tax
7.10.02 Filing
7.10.03 Default
7.10.04 Deductions and Remittance
7.11 Occupancy Rights
7.11.01 Immovables
7.11.02 Leases
7.12 Real Estate Transactions
7.13 Procurement
7.13.01 Equipment
(a) Ownership
(b) Condition
(c) Maintenance and Warranties
(d) Encumbrance
7.13.02 Supply Agreements
7.13.03 Suppliers
7.14 Raw Materials
7.15 Operations
7.15.01 Clients
7.15.02 Finished Products
7.15.03 Warranties
(a) List
(b) Claims
7.15.04 Product Recalls
7.15.05 Conduct of Business
7.15.06 Discriminatory Practices
7.15.07 Conduct
7.15.08 Related Person
7.16 Permits and Licences
7.16.01 List
7.16.02 Situation
7.16.03 Good Standing
7.16.04 No Restrictions
7.17 Public Contracts
7.17.01 Admissibility
7.17.02 RENA (Registre des entreprises non admissibles aux contrats publics)
7.17.03 Register of the DGEQ (Directeur général des élections du Québec)
7.17.04 AMF
7.17.05 Revenu Québec Certificate
7.17.06 Unsatisfactory Performance
7.18 Environmental Matters
7.18.01 Environmental Laws
7.18.02 Hazardous Materials
7.18.03 Compliance
7.18.04 Place of Business
7.18.05 Notice of Default
7.19 Intellectual Property
7.19.01 List
7.19.02 Entitlement
7.19.03 Claims
7.19.04 Transaction
7.19.05 Copyright
7.19.06 Authorizations
7.19.07 Trademarks
a) Right to Register
b) No Confusion
7.19.08 Patents
7.19.09 Trade Secrets/Know-how
7.20 ICT Assets
7.20.01 Good Working Order
7.20.02 Software
7.20.03 Domain Names
7.21 Advertising and Promotions
7.21.01 List
7.21.02 Compliance
7.22 Marketing
7.22.01 List
7.22.02 Trade Practices
7.22.03 Consumer Protection
7.22.04 Electronic Commerce
7.23 Customer Credit
7.23.01 Accounts Receivable
7.23.02 Consignment
7.24 Insurance
7.24.01 List of Policies
7.24.02 Coverage
7.24.03 Good Standing
7.24.04 Claims
7.25 Legal Proceedings
7.26 Disclosure
7.27 Limitation Periods
7.27.01 Tax Matters
7.27.02 Other Matters
7.27.03 Undertaking
7.27.04 Fraud
8.00 MUTUAL DUTIES AND OBLIGATIONS
8.01 Representations and Warranties
8.02 Confidential Information
8.02.01 Undertaking
8.02.02 Duration of Undertaking
8.02.03 End of Agreement
a) Request for Return
b) Destruction
8.02.04 Penalty
8.03 Indemnification
8.03.01 Events
8.03.02 Threshold
8.03.03 Procedure
8.04 Disclosure of Existence of Agreement
8.04.01 Undertaking
8.04.02 Public Advertising
8.04.03 Exception
8.04.04 Default
9.00 DUTIES AND OBLIGATIONS OF PURCHASER
9.01 Closing Date
9.02 Release and Discharge
9.02.01 Time Limit
9.02.02 Compensation
9.03 Financial Statements
10.00 DUTIES AND OBLIGATIONS OF VENDOR
10.01 Closing Session
10.01.01 Return of Share Certificates
10.01.02 Receipt
10.02 Transition Period
10.02.01 Information
10.02.02 Support
10.03 Resignation
10.04 Non-Competition
10.04.01 Scope of Undertaking
10.04.02 Exclusion
a) Balance of Sale Price
b) Share Purchase
10.04.03 Changes to Scope
a) Territory
b) Duration
10.04.04 Penalty
a) Amount Payable
b) Reduction of Sale Price of Subject Shares
c) Preventive Remedies
10.04.05 Assignment of Rights
10.04.06 Reasonableness of Clause
10.05 Non-Solicitation
10.05.01 Personnel
a) Scope of Undertaking
b) Penalty
i) Automatic Penalty
ii) Payment of Penalty
iii) Preventive Remedies
10.05.02 Clients
a) Scope of Undertaking
b) Penalty
i) Automatic Penalty
ii) Payment of Penalty
iii) Preventive Remedies
10.06 Release
11.00 SPECIAL PROVISIONS
11.01 Assignment
11.01.01 Prohibition
11.01.02 Exception
11.01.03 Effect of Breach
11.02 Encumbrance
11.02.01 Prohibition
11.02.02 Effect of Breach
11.03 Force Majeure
11.03.01 No Default
11.03.02 Duty
11.03.03 Rights of Other PARTY
11.04 Drafting Costs
11.05 Further Assurances
11.06 Remedies
11.06.01 Election
11.06.02 No Limitations
11.07 Reimbursement of Legal Costs
12.00 GENERAL PROVISIONS
12.01 Notice
12.02 Dispute Resolution
12.02.01 Good Faith Negotiations
12.02.02 Mediation
12.02.03 Arbitration
a) Notice
b) Reply
c) Appointment of a Third Arbitrator
d) Subcontracts
e) Confidentiality
f) Hearing
g) Ruling
h) Costs
i) Supplementary Rules
12.03 Election
12.04 Counterparts
12.05 Amendment
12.06 No Waiver of Rights
12.07 Electronic Transmission
12.08 Language
13.00 TERMINATION
13.01 With Notice (Event of Default)
13.01.01 Opening
13.01.02 Share Certificates
13.01.03 Amount Collected
14.00 EFFECTIVE DATE
15.00 DURATION
15.01 Indefinite Duration
15.02 Guarantee of Indemnification
15.03 Survival
16.00 SCOPE


SCHEDULE A – EXCERPT OF A RESOLUTION OF PURCHASER
SCHEDULE B – EXCERPT OF A RESOLUTION OF SURETY
SCHEDULE 0.01.05 – ANNUAL BUDGET
SCHEDULE 0.01.06 – CORPORATION’S ARTICLES
SCHEDULE 0.01.20 – ENCUMBRANCES
SCHEDULE 0.01.21 – EQUIPMENT
SCHEDULE 0.01.23 – ESCROW AGREEMENT
SCHEDULE 0.01.25 – FINANCIAL STATEMENTS
SCHEDULE 0.01.30 – IMMOVABLES
SCHEDULE 0.01.31 – INTELLECTUAL PROPERTY
SCHEDULE 0.01.35 – LEASE
SCHEDULE 0.01.39 – OFFER TO PURCHASE (If necessary)
SCHEDULE 0.01.50 – ROLLING STOCK
SCHEDULE 3.02.01 – MONTHLY PAYMENT SCHEDULE
SCHEDULE 4.02.01 – SURETYSHIP AGREEMENT (Long Form)
SCHEDULE 4.02.01 – TERMS OF SURETYSHIP (Short Form)
SCHEDULE 4.03.01 – HYPOTHECARY GUARANTEE
SCHEDULE 6.06 – PURCHASER’S DECLARATION OF EXEMPT INVESTOR
SCHEDULE 7.01.01 – VENDOR’S CERTIFICATE OF COMPLIANCE
SCHEDULE 7.01.03 – VENDOR’S DECLARATION OF EXEMPT INVESTOR
SCHEDULE 7.02.04 – EXCERPT OF A RESOLUTION AUTHORIZING TRANSFER
SCHEDULE 7.03.01 – CORPORATION’S CERTIFICATE OF COMPLIANCE
SCHEDULE 7.06.01 – CHART (SUBSIDIARIES AND AFFILIATES)
SCHEDULE 7.07.04 – PENSION AND INCENTIVE PLANS
SCHEDULE 7.08.01 – FINANCING INSTRUMENTS
SCHEDULE 7.08.02 – LEASING AGREEMENTS
SCHEDULE 7.13.02 – SUPPLY AGREEMENTS
SCHEDULE 7.15.03 – WARRANTIES
SCHEDULE 7.16.01 – LICENCES AND PERMITS
SCHEDULE 7.17.06 – PUBLIC CONTRACTS – UNSATISFACTORY PERFORMANCE
SCHEDULE 7.21.01 – ADVERTISING AGREEMENTS
SCHEDULE 7.22.01 – MARKETING AGREEMENTS
SCHEDULE 7.24.01 – INSURANCE POLICIES
SCHEDULE 7.24.04 – CLAIMS
SCHEDULE 10.04.01 – NON-COMPETITION (INCL. GOODS AND SERVICES)
SCHEDULE 10.05.02 – NON-SOLICITATION OF CLIENTS (INCL. GOODS AND SERVICES)