Choosing between an asset purchase and a share purchase is one of the most important decisions in any M&A transaction. Both structures come with distinct legal, tax, operational implications, and getting it wrong can lead to unintended liabilities or missed opportunities.
At Hadri Law, we help buyers and sellers evaluate the right structure for their specific deal goals, industry, and risk tolerance.
What’s the Difference?
Share Purchase:
The buyer acquires all (or a portion of) the shares of the target corporation. The legal entity remains intact, it just changes ownership.
- Simpler operational transition
- Existing contracts, licenses, and employees typically remain in place
- Buyer assumes all liabilities (known and unknown), unless otherwise negotiated
Asset Purchase:
The buyer acquires specific assets of the business (e.g., inventory, equipment, IP, goodwill) and usually avoids taking on liabilities unless explicitly assumed.
- Buyer selects which assets and liabilities to take
- Better protection against hidden debts or lawsuits
- Requires more due diligence and third-party consents
- May trigger new contracts, licenses, or employee arrangements
Key Considerations When Choosing a Structure
1. Liability Exposure
- Buyers often prefer asset deals to avoid unknown or legacy liabilities.
- Sellers may prefer share deals to fully exit and pass on all business obligations.
2. Tax Implications
- In a share deal, the seller usually pays capital gains tax on the sale of shares.
- In an asset deal, the corporation may face tax on the sale of assets, and the seller may also be taxed on distribution of proceeds (double taxation risk).
Hadri Law works closely with tax advisors to assess and optimize tax treatment on both sides.
3. Third-Party Consents
- Asset sales often require novation or consent for contracts, leases, permits, and licenses.
- Share sales generally avoid this step — contracts remain valid under the same legal entity.
4. Employees
- In share deals, employees remain employed by the same corporation.
- In asset deals, the buyer must offer new contracts; termination costs may arise if employees don’t accept the new terms.
5. Industry-Specific Regulations
Certain industries like financial services or health care may require regulatory approval for share transfers, making asset deals more practical.
When Sellers Prefer Share Sales
- To exit cleanly and transfer all liabilities
- To benefit from lifetime capital gains exemption (for qualifying small business corporation shares)
- To avoid winding down the company post-transaction
How Hadri Law Can Help
We support clients by:
- Structuring deals that match their strategic, legal, and tax priorities
- Drafting or reviewing asset purchase agreements (APAs) and share purchase agreements (SPAs)
- Negotiating representations, warranties, indemnities, and transition plans
- Managing due diligence and closing processes efficiently
Final Thoughts
There’s no one-size-fits-all structure in M&A, but making the right decision early can significantly impact deal success. At Hadri Law, we guide clients through the pros and cons of each option to design a deal that protects their interests and delivers long-term value.
For trusted legal guidance, contact Hadri Law at 437‑397‑2374, email contact@hadrilaw.com, or book your free consultation today.