A share purchase agreement is the contract under which a buyer acquires the outstanding shares of a target corporation directly from its shareholders, so the buyer ends up owning the whole corporate entity — its assets, its contracts and its liabilities, known and unknown — rather than a hand-picked list of assets.
That inheritance is the whole point of the document. Because the corporation itself doesn't change hands as a bundle of assets, the deal doesn't need corporate approval from the target's own shareholders the way an asset sale does — CBCA s. 189(3) requires shareholder approval for “a sale, lease or exchange of all or substantially all the property of a corporation other than in the ordinary course of business,” but a share sale is simply each shareholder selling what they already own; no s. 189 vote is triggered. What replaces that protection is the contract itself.
That is why Treadstone Law's description of an Ontario SPA frames the document around “price mechanics, conditions, representations, indemnity limits, survival periods and closing” — the representations and warranties are what let a buyer recover against the seller if a liability that existed before closing (an unpaid tax assessment, an undisclosed lawsuit) surfaces afterward, since the buyer took the whole corporation, warts included.
Share ownership also carries its own tax gate. A seller who wants the lifetime capital gains exemption on the sale has to be selling shares of a qualified small business corporation, not assets — ITA s. 110.6(2.1) caps the deduction using the same formula that applies to farm and fishing property, but only where the disposition is of qualifying shares. An asset sale by the corporation itself doesn't qualify the individual shareholder for that exemption at all.
A fund buys 100% of a family-owned logistics CCPC through a share purchase agreement for $6,000,000. The agreement's general representations and warranties survive for 24 months after closing, and a $500,000 holdback is withheld from the purchase price for 18 months specifically to cover any breach that surfaces in that window — because the fund now owns every liability the corporation carried into closing, discovered or not, and the holdback is its practical recovery mechanism if one turns up.
See also: Purchase price allocation · Earn-out · Vendor take-back note.
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