Encyclopedia
Share sale
Selling a business by selling the company's shares. The company, including its liabilities, comes with it.
For example: A buyer buys the shares and inherits the company's history. (Illustration only, not a real deal.)
Official source: Income Tax Act (Justice Laws)
Why it matters to you
Buyers take on the company's history, including tax and legal problems, so they'll want more due diligence and warranties. Sellers may get a better tax result, which is why the structure becomes part of the negotiation.
How to use it in your deal
Buyers should know that a share sale brings the company's history with it: debts, lawsuits, tax issues, environmental liabilities and contracts. Do thorough due diligence on the company, not just the property, and get strong representations, warranties and indemnities from the seller.
Ask your accountant about the tax cost of the property inside the company, since a low tax cost means more tax on a future sale, and you don't get a fresh depreciation base. Property transfer tax usually doesn't apply on a share sale because title doesn't change, but check current rules and any anti-avoidance provisions.
Sellers often prefer share sales for tax reasons, including possible use of the lifetime capital gains exemption for qualifying shares. Lenders may need to consent. Leases may treat a change of control as an assignment, so check consents early.
A share sale brings the company's history with it, including old tax filings and claims, so the buyer will want indemnities to match.
Mistakes I see
Skipping company due diligence. Weak indemnities. Ignoring tax cost.
In BC and Vancouver
The Income Tax Act and Property Transfer Tax Act apply; Canada Revenue Agency (CRA) guidance explains capital gains.
Official sources: Income Tax Act (Justice Laws) · Property transfer tax (Government of BC) · CRA Guide T4037: Capital gains
Questions to ask before you sign
- What liabilities does the company have?
- What's the tax cost of the property?
- Does PTT apply?
- Do leases need consent?
Keep reading
Related terms: Asset sale, Change of control
- Sale-leaseback for BC business owners
- Selling a business that owns or leases its real estate in BC
- Asset sale or share sale for a BC business in 2027
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.