Ontario has the deepest verified legal-commentary base of any province in this series. Here is the process end to end, and the one gap worth knowing about.
Key takeaways
STEP 01 OF 10
The federal layer applies in Ontario exactly as elsewhere — the lifetime capital gains exemption, the GST/HST joint election, and Competition Act rules all run on federal statute ITA s. 110.6, ETA s. 167, and Competition Act s. 45. What is genuinely Ontario-specific is the Employment Standards Act’s particular mechanics, the province’s own corporate statute running alongside the CBCA, and a sourcing quirk worth knowing about before citing Ontario corporate law directly.
Ontario is also the only jurisdiction covered in this series with a curated set of verified legal-commentary sources available for its own mechanics — used throughout this guide rather than attempting to quote the Ontario Business Corporations Act directly.
STEP 02 OF 10
A PPSA search is one of the most straightforward and important due diligence steps in an Ontario business purchase — skipping it can mean buying assets a creditor still has a registered claim against per Treadstone Law’s own PPSA guidance. Search against every legal name the seller has used, review every registration returned, and identify all debtor names before assuming the search is complete.
A clean search shows what has been registered; it does not confirm the underlying debt has actually been repaid where a registration was never formally discharged. Contact secured parties directly to confirm current balances, and build time for a slow response or a genuine dispute over the amount owing into the closing schedule as Treadstone Law’s guidance notes.
STEP 03 OF 10
Decide early, and confirm in writing, whether the deal is structured as an asset purchase or a share purchase — the two are treated completely differently for liability exposure, licence and contract transfer, and tax per Treadstone Law’s asset-vs-share guidance. An asset purchase lets the buyer choose which liabilities, if any, come along; a share purchase takes the corporation as a whole, including any liabilities not specifically excluded in the purchase agreement.
Sellers often prefer a share sale for tax reasons, access to the lifetime capital gains exemption chief among them, while buyers often prefer an asset sale for the control it gives over what gets assumed. That tension is worth surfacing explicitly at the LOI stage, not left to be discovered mid-negotiation.
STEP 04 OF 10
Where the deal qualifies as a sale of a business or part of a business, with the recipient acquiring all or substantially all the property reasonably necessary to carry it on, the parties can jointly elect under ETA s. 167(1) to have no tax apply to most of the supply ETA s. 167(1). Goodwill is excluded from tax entirely under the same “all or substantially all” test, independent of whether the election is made ETA s. 167.1.
The election is not available where the seller is a registrant and the buyer is not — so confirming the buyer’s HST registration is a closing condition, not an afterthought, and the deadline for filing the election runs from the buyer’s first reporting period, not from closing itself ETA s. 167(1). Treadstone Law’s own resource on the mechanics of an Ontario HST business sale is worth reading alongside the statute per Treadstone Law’s HST guidance.
STEP 05 OF 10
Ontario’s continuity rule attributes an employee’s service with the seller to the buyer once the employee continues working for the business — the guide’s own example puts it plainly: an employee with ten years’ service, terminated a year after the transfer, gets eight weeks’ notice, not one per Ontario’s ESA guide. Check separately whether the acquisition, once consolidated into the buyer’s broader group, crosses the $2,500,000 global payroll threshold that triggers statutory severance pay after five years’ service Ontario’s ESA guide.
That severance threshold is measured on global payroll, not the acquired business’s own payroll standalone — an easy trap in a sub-scale Ontario add-on that never triggered severance obligations on its own.
STEP 06 OF 10
If a seller non-compete is part of the deal, check it against Ontario’s ban on employee non-compete agreements, in force since 25 October 2021, before assuming it is enforceable. The sale-of-business exception applies only where the seller operated a sole proprietorship or a partnership and becomes an employee of the purchaser — as written, it does not name a corporation per Ontario’s ESA guide.
A restrictive covenant given as part of a genuine sale agreement, kept separate from the employment relationship, has a defensible route through the Competition Act’s ancillary-restraints defence instead Competition Act s. 45(4).
STEP 07 OF 10
Where the target has minority shareholders who are not part of the sale, check what protections they carry under the CBCA’s oppression remedy or its OBCA equivalent before assuming a majority vote alone clears the way. The CBCA remedy covers conduct “oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder,” with the court empowered to order a wide range of remedies including a forced purchase of securities CBCA s. 241 — see Treadstone Law’s minority shareholder guidance for how the same concept plays out under Ontario’s own statute per Treadstone Law.
A minority holder with a credible oppression claim can meaningfully complicate or delay a closing, even where the majority has otherwise approved the sale — flag this during diligence rather than assuming unanimous cooperation from a cap table with more than one name on it.
STEP 08 OF 10
If the transaction is structured as a sale of all or substantially all the target’s assets, CBCA s. 189(3) requires shareholder approval by special resolution, with every share carrying a vote whether or not it otherwise would CBCA s. 189(3). A dissenting shareholder is entitled to the fair value of their shares as of the day before the resolution, with defined notice and payment deadlines running from the vote CBCA s. 190 — Treadstone Law’s guidance on dissenting shareholder rights in an asset sale covers the Ontario-specific practical steps per Treadstone Law.
Confirm before signing whether every shareholder is actually expected to vote in favour — a dissent right exercised by even one holder adds a valuation dispute and a payment timeline to what was otherwise a clean closing.
STEP 09 OF 10
An escrow or holdback arrangement is standard practice on most Ontario deals of any size, securing the buyer against warranty and indemnity claims that surface after closing — Treadstone Law’s escrow-holdback guidance covers the release conditions and timing mechanics typically negotiated per Treadstone Law.
Keep the escrow release conditions distinct from any separate earn-out mechanism if the deal has one — the two serve different purposes, and tying their release to the same trigger event conflates a warranty dispute with a performance dispute, complicating both.
STEP 10 OF 10
One genuine limitation worth knowing about directly: Ontario’s own consolidated statute text is not reliably citable from a standard web fetch, so this guide, and Ontario legal commentary generally, leans on secondary legal-commentary sources written to the OBCA rather than quoting the Act’s section numbers directly the way this series does for the CBCA or BC’s statute. Treat any specific OBCA section number cited elsewhere with appropriate caution unless it comes from a source that has actually verified the text.
Recompute the LCGE arithmetic on an Ontario-sized example the same way as any other province: a $3,800,000 sale price against a $1,100,000 adjusted cost base is a $2,700,000 gain, $1,350,000 taxable before exemption ITA s. 110.6 and s. 38. A qualifying individual claiming the full $625,000 LCGE reduces taxable gain to $725,000 — sheltering $1,250,000 of the underlying gross gain, with the base figure indexed to CPI for years beginning after 2025 ITA s. 117.1.
The gap matters for anyone tempted to cite a specific OBCA section number without a verified source behind it — do not do that. It matters much less in practice, because the commercial mechanics that drive most Ontario deals — asset versus share structuring, the HST election, ESA continuity, PPSA searches — either run on federal statute or are well covered by verified secondary legal-commentary sources.
Where a deal genuinely turns on a specific OBCA provision, a particular governance mechanic or a specific dissent procedure, get it confirmed by Ontario counsel directly rather than relying on any web-sourced summary, including this one.
Much of the deal-terms detail summarized here — reps, warranties, indemnity baskets and caps — gets its own full treatment in negotiating reps, warranties and indemnities, worth reading alongside this guide rather than as a substitute for it.
For city-level context inside Ontario, see acquiring in Hamilton and the Niagara Peninsula and acquiring in Ottawa and the National Capital Region.
No — it is optional and requires a joint election in prescribed form, available only where the buyer is a registrant if the seller is one. Where it is not made or not available, the ordinary GST/HST rules apply to the supply.
No — a share purchase still means the buyer is acquiring the corporation with whatever security interests are registered against its assets, so the search remains just as important as on an asset deal.
Not by relabelling alone — the exception’s wording turns on the underlying business structure being a sole proprietorship or a partnership, not on how the agreement describes it. Get Ontario employment counsel to confirm before relying on the exception.
The CBCA sets the valuation date as the close of business the day before the resolution was adopted, but the actual figure is typically determined through negotiation or, failing agreement, a court process, not a fixed formula in the statute itself.
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