A share sale transfers no contract. The corporation signed them and remains the party, so there is nothing to assign and nobody to ask. That is why change-of-control clauses exist: they fire on the share transfer itself. An asset sale is the mirror image — every contract must be assigned, and most require consent.
Key takeaways
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OBCA section 15, marginal note Corporate powers: “A corporation has the capacity and the rights, powers and privileges of a natural person.” CBCA section 15(1) is to the same effect. That person signed the lease and the credit facility. Selling its shares changes who owns the person, not the person.
Separateness runs both ways: OBCA section 92(1), Shareholders’ liability limited, says “The shareholders of a corporation are not, as shareholders, liable for any act, default, obligation or liability of the corporation” except in four listed cases, and CBCA section 45(1) matches it under Shareholder immunity. Per Yaiguaje v. Chevron Corporation, 2018 ONCA 472: “a corporation’s assets are its own and do not belong to related corporations.”
So every contract stays where it was: same name on the signature page, same terms, same renewal date. No assignment, no notice, no consent — unless a contract says otherwise. The same holds for licences. The cost is that the buyer takes the company with all it carries — the liabilities that follow, and why vendors prefer shares.
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Here the corporation that signed the contracts is not sold, so everything the buyer wants is conveyed individually — and a contract is not conveyed by listing it in a schedule. It is assigned. Ontario’s route is Conveyancing and Law of Property Act section 53(1), Assignments of debts and choses in action, operating on an absolute written assignment of “any debt or other legal chose in action of which express notice in writing has been given to the debtor”.
Two things follow. Written notice to the counterparty is part of the mechanism, not a courtesy. And the section reaches rights only; read in full it says nothing about obligations. See customer contract consents, anti-assignment in supplier contracts and an unassignable supplier contract.
It also needs an approval the share route does not. CBCA section 189(3), Extraordinary sale, lease or exchange: “A sale, lease or exchange of all or substantially all the property of a corporation other than in the ordinary course of business of the corporation requires the approval of the shareholders” — by special resolution under subsection (8). OBCA section 184(3) is identical, and carries dissent rights.
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Québec states the rule in the Code, the cleanest Canadian text to quote although it binds only Québec. Civil Code of Québec article 1440: “A contract has effect only between the contracting parties; it does not affect third persons, except where provided by law.” Article 1637 lets the creditor’s side move — “A creditor may assign to a third person all or part of a claim or a right of action which he has against his debtor” — but not where it “renders his obligation more onerous”.
Substituting the debtor is a different operation. Article 1660 defines novation as arising, among other cases, “where a new debtor is substituted for the former debtor, who is discharged by the creditor”, and article 1661 sets the standard: “Novation is not presumed; the intention to effect it must be evident.” The reading is the same for a seller anywhere: an assumption covenant is a promise from buyer to seller, reallocating cost without taking the seller’s name off the counterparty’s contract — novation versus assignment.
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It does not ask whether the contract was assigned. It asks whether the ownership of the party changed. That is why a share deal, which defeats every anti-assignment clause by never triggering one, runs straight into it. Treadstone Law’s guide to assignment and change-of-control clauses and its companion on the clause in a share purchase divide the ground.
What it reaches is usually wider than a sale: a transfer of a majority of the voting shares, an issuance diluting existing holders below the threshold, a change in whoever controls the shareholder indirectly, an amalgamation. Treadstone Law on adding a partner rather than selling shows it firing where nobody sees a sale.
Reading only for the word “consent” misses the consequence: a clause may instead give a termination right with no consent step, a price reset, loan acceleration, or a right of first refusal over the business being sold.
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Where a contract uses the word without defining it, the corporate statutes supply the test. CBCA section 2(3), marginal note Control, requires both that “securities of the body corporate to which are attached more than fifty per cent of the votes that may be cast to elect directors of the body corporate are held” by or for that person, and that those votes be “sufficient, if exercised, to elect a majority of the directors”. OBCA section 1(5) agrees.
Parliament does not use one threshold everywhere, which is the tell that the number is a policy choice. Under Investment Canada Act section 28(3), “the acquisition of less than a majority but one-third or more of the voting shares of a corporation” is presumed to be an acquisition of control unless it is established that the corporation “is not controlled in fact by the acquirer through the ownership of voting shares”. That governs investments by non-Canadians and nothing else, but it shows a third of the votes doing a majority’s work. The Income Tax Act has its own test: losing the losses on a change of control.
Section 28(1) of that Act enumerates the routes instead of assuming them, listing “the acquisition of voting shares of a corporation incorporated in Canada carrying on the Canadian business” and, separately, “the acquisition of all or substantially all of the assets used in carrying on the Canadian business”. Two named acts, kept apart. None of these definitions governs your supply agreement; the clause’s own does, and drafting routinely sets it below fifty per cent.
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Ontario’s Personal Property Security Act section 40(4), Prohibition or restriction on assignment, reaches “A term in the contract between the account debtor and the assignor that prohibits or restricts the assignment of… the whole of the account or chattel paper”. Such a term “is binding on the assignor only to the extent of making the assignor liable to the account debtor for breach of their contract”, and “is unenforceable against third parties”.
The scope is narrower than it sounds: it addresses the account — the money owing — not the contract generating it. A buyer of the receivables takes them despite the clause; a buyer that wants to keep performing and billing still needs the counterparty. See also security registered against the assets.
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The third structure behaves like neither. OBCA section 179, Effect of certificate: “the amalgamating corporations cease to exist as entities separate from the amalgamated corporation”, which “possesses all the property, rights, privileges and franchises and is subject to all liabilities” … “and all contracts, disabilities and debts of each of the amalgamating corporations”. CBCA section 186 is drafted in continuity terms.
Contracts therefore arrive without an assignment — not the same as arriving without a consent problem. Treadstone Law on amalgamating instead of assigning a lease notes that modern leases are drafted to catch the manoeuvre, treating an amalgamation as a change of control in its own right. Whether a clause catching an assignment “by operation of law” reaches a Canadian amalgamation is a question of construction I could not settle from a source I could reach: CanLII and the Supreme Court’s decisions site are both blocked here. Treat it as a drafting risk, not a settled rule.
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Build the consent schedule from the contracts, both ways. For an asset deal, mark every contract assignable, assignable with consent, or prohibited. For a share deal, search the same set for change-of-control language, ownership thresholds and termination rights needing no consent. Reviewing material contracts scopes which ones justify it.
The predictable places are the lease, the franchise agreement, the credit facility and the biggest customer contracts. Landlord consent is its own subject, for Ontario, BC and Alberta and Québec, and franchisor approval in how franchise transfers are approved. Add the clause in franchise agreements and share sales and leases: a share purchase can trigger those rights with no assignment.
Then make it work in the agreement. The consents that matter become conditions precedent, so the buyer need not close into a business missing its premises or its biggest account; the rest are reasonable-efforts covenants. Get each in writing — insisting consents be in writing is standard, not aggressive. One boundary: this page is the OBCA, the CBCA and Ontario statutes, with Québec cited only where the Code is quoted.
No. A share sale changes who owns the shares, not who signed the contracts — the corporation remains the same contracting party, so there is no assignment and no consent to seek, unless a change-of-control clause fires on the ownership change itself.
Not fully. Ontario’s PPSA makes a contractual bar on assigning an account unenforceable against third parties, so a buyer of the receivables takes them despite the clause — though a buyer who wants to keep performing and billing under the underlying contract still needs the counterparty’s consent.
The corporate statute’s default test applies — more than fifty per cent of the votes that may be cast to elect directors, under CBCA section 2(3) and its OBCA equivalent. A contract’s own drafting can set a lower bar, and often does, so the statutory test only fills gaps where the contract is silent.
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