One of the first and most important decisions in any M&A transaction is whether to structure the deal as a share purchase or an asset purchase. Both structures have different legal, tax, and commercial implications for buyers and sellers.
At Hadri Law, we guide clients through every stage of buying or selling a business, including evaluating the most suitable structure for their goals. Below is a breakdown of each option and what you should consider when making your decision.
What Is a Share Purchase?
In a share purchase, the buyer acquires ownership of the corporation by purchasing its shares directly from the existing shareholders. The company remains intact same legal entity, same contracts, same obligations.
Common in:
- Sales of entire businesses as going concerns
- Situations where continuity of operations, contracts, or licences is critical
Pros for Buyers:
- No need to reassign contracts, leases, or permits (unless there’s a change-of-control clause)
- Business continues operating uninterrupted under the same name and entity
Cons for Buyers:
- Buyer assumes all liabilities, known and unknown
- More intensive due diligence is required
- May inherit tax exposures, pending litigation, or employee disputes
What Is an Asset Purchase?
In an asset purchase, the buyer selects and purchases specific business assets (e.g., inventory, equipment, goodwill, client contracts), rather than the shares of the company. The seller retains the legal entity and any excluded assets or liabilities.
Common in:
- Risk-averse acquisitions
- Purchases of business units or distressed companies
Pros for Buyers:
- Flexibility to pick and choose which assets and liabilities to acquire
- Reduced risk of inheriting legal or tax liabilities
- Possible tax benefits (e.g., asset depreciation)
Cons for Buyers:
- Requires individual assignment or renegotiation of contracts, permits, and licences
- May need to set up a new corporation and hire staff under new terms
- Employees are not automatically transferred — triggering potential termination costs
Key Factors in Choosing the Right Structure
| Consideration | Favouring Share Purchase | Favouring Asset Purchase |
| Business continuity | Buyer wants seamless transition | Buyer can rebuild and restructure |
| Tax planning | Seller wants capital gains treatment | Buyer wants tax cost base reset |
| Liability management | Buyer willing to accept risks with legal protections | Buyer prefers to avoid inherited liabilities |
| Contract transfers | Difficult or costly to renegotiate | Contracts are easily replaceable or non-binding |
| Employees & HR | Buyer wants to maintain staff and roles | Buyer prefers to hire new team or renegotiate terms |
Bonus Tip: Hybrid Deals
Not all deals fit neatly into one category. Some M&A transactions involve hybrid structures, where key assets are purchased, but elements of the share structure are retained. Creative structuring, supported by legal and tax advisors, can help shape the deal to fit your needs.
Final Thoughts
There is no one-size-fits-all answer when it comes to choosing between a share or asset purchase. The decision depends on the business’s industry, legal exposure, and your long-term strategy.
At Hadri Law, we help buyers and sellers in Canada and internationally assess risk, protect their interests, and structure deals that close efficiently. Whether you’re acquiring a small business or selling a complex corporate group, we can guide you every step of the way.
Schedule a free consultation with Hadri Law to address your share or asset purchase. Contact us at 437-974-2374 or email contact@hadrilaw.com to begin.