Just A Minute - Podcast Episode 45: Assets Vs. Share Purchase

Watch Podcast - Click Here


[00:12] Welcome to a new episode of just a minute by Landmark law. Today's episode is presented to you by Yufei to help educate our listeners on various legal scenarios.

[00:23] BELL CHIME

[00:26] Today's episode will on asset vs. Share purchase of a business.

[00:29] When trying to purchase or sell a business, a major question to consider is whether the transaction should be structured as an asset purchase or a share purchase. Here are some key differences.

[00:40] For a share purchase, the purchaser acquires both assets and liabilities of the corporation. Because of this, it's generally faster and less complex than an asset purchase.

[00:52] The sale of shares is not subject to HST or PST tax liability is limited to capital gains which receives more favorable tax treatment compared to income tax.

[01:03] For an asset purchase the purchaser has the freedom to choose which assets and accompanying liabilities leases contracts employees that wishes to purchase. Any unassumed liabilities Remain the seller's responsibility reducing risk for the buyer.

[01:18] The due diligence requirements and representations for this kind of purchase are less extensive compared to a share purchase.

[01:25] Assets and third-party contracts must be transferred to the purchaser's name and a new pension and benefits plan must be established. Purchasing certain assets may incur PST for the buyer.

[01:37] In an asset sale, the corporation is taxed when it sells its assets and the shareholder is taxed when profits are distributed. The seller maintains the ability to utilize existing tax losses for the corporation.

[01:52] Please call or visit our website at landmarklaw.ca for any help on your real estate, estate, and corporate legal matters.