Share purchase agreements_toronto_lawyer

Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com
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Michael Carabash
Share Purchase Agreements
DISCLAIMER: Please note that the information provided in this DL Guide is NOT legal advice and is
provided for educational purposes only. Laws are subject to change and without notice. This DL Guide may
be outdated. If you need legal advice with respect to drafting, revising, negotiating or resolving a dispute
concerning a Share Purchase Agreement, you should seek professional assistance (e.g. make a post on
Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers
registered to help you. You can contact Michael Carabash directly at michael@carabashlaw.com.
Last Updated: October 2010
© 2008-2010, Dynamic Lawyers Ltd. All Rights Reserved.

Share Purchase Agreements – Need a Lawyer? Page 2 of 20
Table of Contents
What is a Share Purchase Agreement?...........................................................................................................3
Selling Shares vs. Selling Assets....................................................................................................................3
The Share Purchase Agreement: Terms and Conditions................................................................................3
Introductory Clause ........................................................................................................................................4
Background.....................................................................................................................................................5
Definitions and Interpretation.........................................................................................................................6
Purchase and Sale...........................................................................................................................................7
Representations and Warranties .....................................................................................................................9
Covenants .....................................................................................................................................................12
Indemnification.............................................................................................................................................16
General Terms ..............................................................................................................................................18
About Us.......................................................................................................................................................20

What is a Share Purchase Agreement?
A “Share Purchase Agreement” is used when a person (called a “Vendor”) wants to sell its shares of a
corporation (either all or just some) to another person (called a “Purchaser”). A Share Purchase Agreement
outlines some basic information about the shares, the corporation, the Vendor, the purchaser, and the deal
itself (e.g. the price for the shares, the shares being purchased, the closing conditions, etc.).
Selling Shares vs. Selling Assets
The Vendor has a clear incentive to sell the shares of a business instead of just its assets. Selling the shares
means that the corporation as a whole is simply changing ownership. All of the assets, liabilities, leases,
licenses, consents, etc. are in the name of the corporation. So whoever owns the shares of the corporation
now assumes those assets and liabilities. The problem here is that the Purchaser may be somewhat afraid of
HIDDEN LIABILITIES of the corporation. That’s why they only want to buy the corporation’s assets and
leave everything else with the Vendor. But the Vendor doesn’t want that for one simple reason: there are
significant tax advantages to selling shares of a qualifying small business corporation in Canada than selling
its assets. It all has to do with paying no capital gains tax. You see, if the Vendor originally bought the
shares for $1 from the company and then sold them for $10,000, then the Vendor would have a capital gain of
$9,999, half of which is taxable at the Vendor’s full tax rate. But the government of Canada is providing a
$375,000 lifetime capital gains exemption; this means that the Vendor will end up paying no taxes on the sale
of qualifying shares of a small business corporation. To find out how you can qualify for this exemption,
contact an accountant.
The Share Purchase Agreement: Terms and Conditions
In what is to follow, I will briefly discuss some of the things you should think about when entering into a
Share Purchase Agreement.

Introductory Clause
The Introductory Clause is the first part of the Share Purchase Agreement. It usually indicates the nature of
the agreement being entered into (i.e. Share Purchase Agreement), the date of the agreement, and the parties.
I’ll briefly discuss each of these in turn.
Date
The date is important because it will be used by the parties to indicate when they entered into the agreement.
This may be relevant for limitation periods (in case there are lawsuits or indemnification claims arising from
a breach of the Share Purchase Agreement). The date also becomes relevant if the “Closing Date” (i.e. when
the transaction is set to be completed) is based on [x] days after the date stated in the introductory clause. If
the deal is actually happening on the date stated in the introductory clause, then there won’t be a period of
due diligence or waiting; it all gets done that same day.
The Parties
The parties to a Share Purchase Agreement should include all of the parties involved in the agreement. Some
parties may have limited roles (e.g. confidentiality provisions, giving representations, covenants, and
indemnities). These parties may be human beings, corporations, partnerships, etc. The bottom line is that, if
you want to bind a party to this Share Purchase Agreement so that it follows the rules, then you’ll want to
include its full legal name here.
Now, each party to a Share Purchase Agreement may need its own lawyer; I realize that this is not the most
cost-effective way to draft up, negotiate, and finalize a Share Purchase Agreement, but it will help each party
promote their interests and protect their rights. If there is a conflict of interest, then a lawyer representing
multiple parties will usually have to withdraw their services (either entirely or for some but not all of the
parties).
The parties should be described using their full legal names. Remember: corporations should be using trade
names in addition to their corporation names. Directors, officers, and others who are using trade names and
not indicating that corporations are the ones actually entering into the agreement can get into trouble:
PERSONAL LIABILITY!

You DON’T need to clutter up the introductory clause by including all the address and contact information of
the parties. You can include this stuff in the Notice section at the end of the agreement (under the general
terms). Otherwise, your first page is going to look busy.
On the First Part, On the Second Part
In many commercial agreement, you’ll find the words “On the First Part” written after the first party or
parties (e.g. the landlord) and “On the Second Part” written after the second party or parties (e.g. the
Tenants). I don’t find this language particularly useful. It’s archaic legal jargon. You can do without it as it
adds nothing but space and confusion.
Background
Here, you’ll want to provide information on the purpose and context leading up to the body of the agreement.
You generally want to mention in this section that:
The Corporation’s share capital consists of [X] number of Class [X] shares, etc.
The selling party (the “Vendor“) is the registered and beneficial owner of [X] issued and outstanding
shares in the capital of the Corporation.
The purchasing party (the “Purchaser“) now wishes to purchase those shares, and the Vendor now
wishes to sell those shares, on the terms and conditions in this Agreement.
Note: if there are restrictive covenants (e.g. confidentiality provisions, non compete and non-solicitation
clauses), then you’ll also want to briefly mention the proprietary interests being sought to be protected in the
background section of the Share Purchase Agreement. Alternatively, you could mention those proprietary
interests in the actual provisions dealing with the restrictive covenants. You can check out a DL Guide I’ve
written about restrictive covenants here.

Definitions and Interpretation
Definitions and Interpretation
Here, you’ll want to define key terms that are used throughout the rest of the Agreement (for ease of
reference). Here are some examples of defined terms:
“Act” means (e.g. Ontario Business Corporations Act or Canada Business Corporations Act), as
amended and restated from time to time;
“Agreement” means this Share Purchase Agreement, including any schedules attached hereto, and all
amendments thereof;
“Audited Financial Statements” means the audited consolidated financial statements of the
Corporation for the fiscal year that ended on [x], consisting of a balance sheet, income statement, cash
flow statement, and statement of retained earnings, together with accompanying notes and the
Corporation’s auditor’s opinion, a copy of which is attached as Schedule [x];
“Business” means [x] (this could come in handy with respect to restrictive covenants like non-
competes);
“Leased Premises” means [x] (this could be applicable if the corporation leases premises in a
commercial or industrial space);
“Person” means any individual, corporation, partnership, firm, trust, unincorporated organization,
government agency, joint venture, association, and any other form of entity or organization;
“Purchased Shares” means the [x] issued and outstanding shares in the Capital of the Corporation
that are being sold by the Vendor to the Purchaser;
There are lots of other types of words that may end up in the Definitions Section of the Agreement. This will
depend on your particular circumstances.
Interpretation of the Share Purchase Agreement
There are a few things you should get out of the way up front when it comes to interpreting the agreement.
You can always put these things in the general terms of the agreement (at the end) or you can put them here.
Here are some things that you’ll want to include here:

Accounting Terms: all accounting terms shall be construed in accordance with Generally Accepted
Accounting Principles.
Calculating Time: this will explain when a period beings and when a period ends for the purpose of
giving things like notice in the agreement, etc.
Currency: any currency to be used or calculated in the Share Purchase Agreement shall be in [x]
dollars?
Governing Law: the Share Purchase Agreement is to be construed and interpreted in accordance with
Ontario law and the laws of Canada applicable therein (or whatever jurisdiction you want; keep in
mind that laws change from one jurisdiction to the next!).
Section Headings: the headings of Articles and Sections are for convenience only and do not affect
the interpretation of the Share Purchase Agreement itself.
Masculine vs. Feminine: references to a gender shall include the other gender, unless the context says
otherwise.
Singular vs. Plural: references to a number shall include both the singular and plural, unless the
context requires otherwise.
Severability: if one section of the Agreement is struck down by a court of competent jurisdiction, the
rest of the agreement shall still remain valid and enforceable.
Statutes: a reference to a statute includes any amended or re-enacted version of that statute, including
any successor legislation.
Schedules: the following are the schedules attached to and incorporated into the Agreement: …
Purchase and Sale
OK, we finally made it to the meat and potatoes of the Share Purchase Agreement. Basically, here you’ll
want to talk about the Share being purchased, the price for those shares, and other related matters.
The Purchased Shares
This section says that the Vendor is selling, and the Purchaser is buying, the “Purchased Shares” (this is a
defined term) at the “Closing Date”. Now, “Closing Date” is also a defined term in the Share Purchase
Agreement. It will indicate a specific time, date, and place or simply say “or as the Parties may agree upon”
(or something like that).

The Price
Here, you’ll get the chance to identify what price is being paid (recall that the currency to be used in under
the Interpretation Section of the Share Purchase Agreement), when it’s to be paid (i.e. in installments or with
a deposit being held in trust when the Purchaser signs and delivers the agreement and the remainder being
paid on the Closing Date), and how it’s to be paid (e.g. certified cheque, bank draft, cash, or in readily
available funds). Now, the purchase price may be subject to an adjustment based on a review of the financial
statements, books, records, etc. Now, if you’re dealing with a deposit situation, one party may want to say in
the Share Purchase Agreement that if the other party prevents the deal from closing, then that deposit will be
forfeit. Otherwise, the deposit is to be applied to the purchase price.
Can the purchaser pay?
A concern of the Vendor is: does the Purchaser have enough $$$ to actually pay for the shares? Well, it will
never know for certain until the Closing Date arrives. What can the Vendor do to mitigate its exposure to the
Buyer defaulting? Well, first, the Vendor can require that the Purchaser provide it with a Promissory Note.
That Promissory Note can also pledge the Purchased Shares in the event that the Purchaser defaults. The
Purchased Shares could be held in escrow until the Purchaser has coughed up all of the money. Also, a
shareholder of a corporation who is purchasing the shares could be required to PERSONALLY indemnify or
guarantee that the Purchaser will pay.
Final Purchase Price
The final purchase price will be based on a final review of the financial performance of the corporation – as
told by its statements, books, records, etc. The idea here is that there may be two different valuations given
to the shares: one on the day of the audited financial statements and the other on the Closing Date. If these
two numbers diverge considerably, then there may need to be a mechanism put in place to resolve disputes.

Costs for Closing
Who is going to be responsible for the closing costs (e.g. lawyer and accounting fees?). Will it be the
Vendor, the Purchaser, or both? Who will perform the audit and bear those costs – the Vendor’s auditor or
the Purchaser’s?
Income Tax Considerations
If the Vendor is a non-resident of Canada, it must give the Purchaser at or before the Closing Date a
certificate issued pursuant to Section 116 of the Income Tax Act containing a certificate limit for the Vendor
at least equal to the Purchase Price. Failure to do so means that the Purchaser can withhold from the cash
portion of the Purchase Price at the Closing Date the amount required to be withheld pursuant to Section 116.
So there you have it: this part of the Share Purchase Agreement dealt with the buying and selling of the
shares. A lot of this had to do with the money being paid, how to ensure the Vendor gets it, and who bears
the costs associated with closing.
Representations and Warranties
Representations and warranties are promises or statements which a party makes and which the other party is
relying upon in order to move forward on this deal in the Share Purchase Agreement. A “representation” is
a statement of the past or present facts that are represented by a party as being true. “Warranties” are
promises that existing or future facts are or will be true. The distinction between representations and
warranties is no longer relevant.

The Vendor’s Representations
The idea behind the Vendor’s representations is simple: the Purchase wants the Vendor to make statements
concerning the corporation and the shares because that’s what it’s buying (in whole or in part). If the
representations of the Vendor do not turn out to be true, complete, or fair, then the Purchaser may be able to
get out of the Share Purchase Agreement and get its deposit back (if it gave one). Indeed, the Vendor may
even have to indemnify (i.e. pay) the Purchaser if the representations don’t turn out to be true. So the
Vendor’s representations allow certain risk to be put on the Vendor; the Purchaser wants to make sure it’s
getting what it bargained for.
So what kinds of representations could the Vendor make? Well, here’s a non-exhaustive list:
The corporation is valid and in good standing with relevant government bodies.
The corporation is a private, non-reporting company (e.g. it has less than 50 shareholders, does not
distribute its shares to the public, etc.)
The corporation carries on the business of [x] in the following locations: …
The corporation has complied with extra-provincial and other applicable licensing registration or
qualification requirements;
The corporation’s constating documents (such as articles of incorporation) are unchanged since a
specified date, and accurate copies provided and permit the company to carry on its present business
and own its present assets;
The corporation has [x] number of class [x] type of authorized, issued and outstanding shares;
The corporation’ [x] class of shares have the following rights: …;
The corporation’s issued shares are fully paid and non-assessable;
The company has no other issued, or agreements to issue, securities, options, rights, etc.;
The Vendor owns the following number and type of shares: …;
The directors and officers of the company are [x];
The Vendor has good and marketable title to the shares;
The sale purchase has been authorized by all necessary corporate action;
There are no other contractual or regulatory consents, licenses, permits or approvals required, except
as set out in the agreement;
There is or is not a shareholders’ agreement;

There are no restrictions on share transfers or such restrictions have otherwise been dealt with;
No court orders preventing the transaction from occurring;
The Audited Financial Statements and the Closing Date Financial Statements have been prepared
according to GAAP and are true, complete, and fair;
There haven’t been any material adverse changes in the corporation’s Business, assets, financial
condition, earnings, etc.;
There aren’t any known or pending litigation claims against the corporation, including but not limited
to administrative matters or investigations by any governmental authority; and
Representations concerning inventories, accounts receivables, insurance, books and records, bank
accounts and powers of attorney, customers and suppliers, material contracts, real or leased property,
labour matters, intellectual property matters, environmental concerns and and tax matters.
PHEW! There are a whole slew of representations which the Vendor could make to help satisfy the
Purchaser that it the deal is legitimate.
The Purchaser’s Representations
Ok, so what kinds of things will the Purchaser be representing? Well, basically, the Vendor wants to make
sure that the Purchaser is ALLOWED to purchase the shares (e.g. it has all necessary consents, approvals,
etc. and there’s nothing preventing it from doing so) and that it HAS THE $$$ to make it happen. Here’s a
non-exhaustive list of the types of things that the Purchaser would represent to the Vendor:
If the Purchaser is a corporation, then it has all the necessary corporate power to make the deal
happen;
The Purchaser would not, by going through with the Share Purchase, end up violating any law, order,
resolution of its own board, contract which it has with another party, etc.;
The Purchaser has assets worth [x], gross revenues in the amount of [x] and net income in the amount
of [x] as of a certain date; and
The Purchaser is not a non-Canadian within the meaning of the Investment Canada Act.

Survival of Representations
OK, so once the Vendor and the Purchaser have written out all of their representations, a few things need to
be said about them generally. First off, how long are the representations supposed to last for after the
closing? If they are violated (i.e. not true) prior to the closing, what will be the consequences for the Vendor
or Purchaser? Will there be a limitation period on bringing claims for breach of representation? Certain key
representations – such as corporate existence and authority, share capital, title to shares, etc. – survive past
the closing INDEFINITELY. These are just too important to put limitations on.
So there you have it: representations of the Vendor and the Purchaser. Next, I’ll be discussing covenants
(which are conditions which the parties must do or refrain from doing during the time after the signing of the
Share Purchase Agreement and leading up to and including the Closing Date).
Covenants
Covenants are conditions which the parties must do or refrain from doing during the time after the signing of
the Share Purchase Agreement and leading up to and including the Closing Date. Why are covenants so
important? Well, if they are not adhered to by the parties (typically the Vendor), then the transaction may not
close. Not only that, but if the Vendor agreed to indemnify the Purchaser for failing to close or for failing to
comply with a covenant, then the Vendor may end up PAYING the PURCHASER $$$!
Can a Covenant be Waived?
As with typical commercial agreements, a term such as a covenant can be waived by a party who is entitled to
benefit from it. This can be contained in the contract itself. Typically, a waiver provision may read
something like this:
Waiver. A waiver of any term or condition of this Agreement is not binding unless it is in writing
and signed by the party entitled to grant it. No waiver shall be a waiver of any other right. No
failure to exercise, and no delay in exercising, any right or remedy, under this Agreement shall be
a waiver of that right or remedy.

So what if there is no waiver provision? Well, then you have to turn to the common law (i.e. judge-made
law) to see what the courts have said. In Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance
Co., [1994] S.C.J. No. 59, the Supreme Court of Canada held that waiver of a right will be found where a
person had full knowledge of their rights and an unequivocal and conscious intention to abandon them. That
intention can be expressed in a formal legal document, in some informal fashion or inferred from conduct.
Types of Covenants
Here are some examples of conditions which the Vendor may have to meet leading up to the Closing Date:
The Vendor must continue to have the Corporation continue its normal business. This means that the
Corporation can’t amend its constating documents (e.g. articles, by laws, etc.), merge with another
company, transfer its assets (other than in the ordinary course of its business), distribute dividends, or
enter into certain types of agreements which it has previously represented that it hasn’t (e.g. an
agreement that would allow a third party to purchase shares or convert their existing shares, etc.);
The Vendor must ensure that the Corporation maintains adequate insurance and regulatory approvals,
consents, and authorization leading up to the Closing Date;
The Vendor must preserve the Corporation’s Goodwill and assets (including inventory) and pay off its
liabilities and obligations as it otherwise would in the normal course of its business;
The Vendor won’t talk with anyone else about buying the “Purchased Shares” (recall that this is a
defined term that refers to the shares that the Purchaser is buying and that the Vendor is selling;
The Vendor will make sure that both it and the Corporation have all the necessary internal approvals
to make the transaction happen;
The Vendor has to give the Purchaser access to the Corporation’s records and will deliver those
corporate records at the Closing Date.
This list could go on and on. The important thing to remember is that the Vendor must be in a position to be
able to actually do these things. For example, if the Vendor is a minority shareholder of the Corporation,
how then can it promise that the Corporation is NOT going to change its constating documents? The Vendor
might not be able to give such a promise because it doesn’t have the requisite power or authority to make it
happen. So you really need to think about customizing the Share Purchase Agreement to your specific needs
and requirements.

Conditions for Closing the Deal: Purchaser
So what kinds of conditions would be in favour of the Purchaser? In other words, what conditions could
allow the Purchaser to not go ahead with the deal? Well, as discussed before, if the Vendor cannot
GUARANTEE the TRUTH, ACCURACY, and COMPLETENESS of the representations and warranties it
gave at the time of Closing, then the Purchaser may be able to walk away. Same goes with the covenants
(e.g. there has been a material change in the business from the time of signing the Share Purchase Agreement
but before the closing).
It may be a hard pill for the Vendor to swallow, but there is also the issue of pending or actual lawsuits
against it: if an investigation has started or a lawsuit filed after the signing of the Share Purchase Agreement
but before the Closing Date, will the Purchaser be able to walk away because the Vendor violated a
covenant? This may be hard to swallow because it may be outside the Vendor’s control who investigates or
sues it. Anyways, it’s just something to think about.
Another covenant that the Vendor may violate deals with failing to get all internal corporate and external
government approvals. To be clear, here, however, the Vendor would probably want to have a defined list of
all the approvals it requires in order to satisfy the covenants in the Share Purchase Agreement (instead of just
a general free-for-all which could allow the Purchaser to avoid closing the deal and then blaming the
Vendor).
There are other things which the Vendor may have promised as part of sealing the deal, such as the Vendor:
completing a non-compete agreement;
delivering an up to date minute book (with all corporate records, etc.);
providing such documentation as is required to be delivered to the purchaser pursuant to the Share
Purchase Agreement;
completing a confidentiality agreement;
getting new employment agreements executed;
getting resignations from the existing directors and officers; and
getting releases from parties which may have claims against the corporation.

What are the consequences?
In addition to the deal not going through because of the Vendor failing to do certain things to close the deal,
the Purchaser may actually have a RIGHT TO DAMAGES. For example, there may be a provision in the
Share Purchase Agreement that says that the Vendor will indemnify and save harmless (i.e. pay for) the
Purchaser’s legal and accounting expenses incurred in reviewing and preparing for closing IF the deal dies
because of the Vendor’s conduct, actions or omissions. Just be weary of these things! If the Vendor wants
to limit its exposure to paying damages, there should be a provision in the Share Purchase Agreement that
specifically says that, if a closing condition isn’t met and the deal dies, then the Vendor WON’T be liable to
the purchaser for anything – financial or otherwise.
Conditions for Closing the Deal: Vendor
So what kinds of things could the Vendor point to in order to avoid closing the deal? Well, as with the
Purchaser, the Vendor could claim that the Purchaser breached its representations and warranties. There are
much less of these than the Vendor had to give. Examples include: getting the necessary consents and
approvals to authorize the purchase of the shares, acknowledging that the Share Purchase Agreement won’t
cause the purchaser to violate any laws or agreements, and certain representations concerning the Income Tax
Act, Competition Act, and Investment Canada Act. Again, the Vendor may have the right to walk away from
the deal if these representations and warranties are found not to be true leading up to and at the time of
Closing.
Can a Closing Condition be Waived?
As with typical commercial agreements, a closing condition can be waived by a party who is entitled to
benefit from it. This can be contained in the contract itself. You can see above (page 12) for a general
discussion about waivers.

Place and Deliveries
The final aspect of closing has to deal with the place where it’s going to take place and what needs to be
delivered. Typically, a closing will happen at a lawyer’s office, a client’s place of business, or office space
that is rented out at a hotel. The deliveries will include the Purchased Shares, blank share transfer
endorsements, the corporate minute book, and other such documents as are required to be provided.
Indemnification
On the one hand, the Purchaser wants the Vendor to indemnify or pay it for representations and warranties
that are not true or which do not stay true for a set period of time after the deal closes. On the other hand, the
Vendor wants to avoid any future liabilities (particularly if it is selling ALL of the shares of the corporation
and won’t have anything to do with it thereafter). That’s what makes the issue of indemnification so
contentious.
What kinds of indemnifications could there be?
If you’re Purchaser, you will want the Vendor to indemnify you (i.e. pay you for) for things like:
undisclosed liabilities of the corporation, including taxes owing, which are discovered at the Closing
Date; or
breaches of any representation, warranty or covenant which the Vendor had given; and
any claims or expenses in respect of the above.
The last two things would apply if you were the Vendor (i.e. if the Purchaser violated a representation,
warranty, or covenant, etc.).
Procedural Steps
So what kinds of procedural steps would be involved in making an indemnification claim? Well, below are a
few of the types of procedural rights that the parties can create with respecting to indemnification claims.

Notice
A party claiming an indemnification would have to provide notice in writing to the other side of such a claim.
To be valid, that notice may need to have certain information (e.g. facts related to the claim, supporting
documentation or information, and the amount of the claim if ascertainable).
Investigation
The party subject to the indemnification claim may want to have a right to investigate such a claim.
Investigation rights may be subject to timelines and renewals of timelines.
Thresholds
There may be monetary limits on the amount that a party can claim.
Time Limits
There may be time limitations on bringing an indemnification claim, such that if a party tries to bring a claim
after 6 months or a year, they may be barred from doing so by the Share Purchase Agreement.
Payments to Third Parties
There may be a provision that says that, if a party pays off a third party claim, it can then go after the other
party via an indemnification claim (for reimbursement).
Negotiating Settlements
There may be a provision that says that no one party has the right to negotiate a settlement without the
approval / participation of the other party.

Conclusion
Overall, while the Vendor wants to avoid having to pay the Purchaser for breach of representations,
warranties, covenants, etc., it could get insurance to cover these things. Also, in order for the Vendor to limit
its liability, it will want these indemnification provisions to be the ONLY remedies which the purchaser has
available to it. It doesn’t want to end up in court for other things (which could expand its overall liability).
General Terms
General terms help to fill in some of the gaps concerning the agreement. They appear at the end of a typical
Share Purchase Agreement and generally deal with the following matters:
Agreement and Counterparts
This section says how the parties can enter into this agreement (e.g. by fax, email, etc.). The parties can send
each other copies of the agreement and all of the copies together shall form the same agreement. This is
particularly helpful when you’ve got a lot of parties signing the agreement. This section will also say that
schedules, appendices, etc. are incorporated into the agreement.
Entire Agreement
This section will say that there is nothing beyond the four corners of the Share Purchase Agreement itself that
will govern the subject matter of the agreement (i.e. the terms and conditions of the share purchase). This
means that, if you want to have a separate confidentiality, non-compete, or non-solicitation agreement as part
of this agreement, you don’t want to accidentally invalidate it! You want to make reference to it in this
section.

Further Assurances
This section basically says that the parties shall promptly do what they have to do in order to make this deal
happen. This may include, for example, getting consents and approvals (from within and externally). It may
also include paying off liabilities, discharging liens, etc.
Governing Law
Which law will govern disputes concerning the interpretation or enforcement of the Share Purchase
Agreement? Typically, parties want to have their own local laws govern because it will be most convenient
and cost-effective for them. But each jurisdiction has its own laws and parties should be mindful of which
legal jurisdictions are more favourable to them (i.e. as Vendor or Purchaser) based on the jurisprudence (e.g.
judge-made law, statute, etc.)
Notice
How can notice be made? By fax, email, postage pre-paid, personal service, etc.? What is the contact
information for each party? You’ll want to include it here?
Survival
Typically you see a provision saying that, if one provision of the agreement is struck down by a court of
competent jurisdiction, then the rest of the agreement will nevertheless remain intact and valid. This prevents
against the whole agreement being struck down if simply one term or condition is.
Waiver
As previously discussed, for a waiver to be valid, the party entitled to benefit from it must expressly (not
implicitly) waive their right; acquiescence or silence won’t count. Also, a party that gives one waiver doesn’t
mean it gives other waivers.

Survival
Will certain terms survive the Closing Date? For example, will the Vendor have given certain
representations, warranties, and covenants that are to remain valid YEARS after closing? If they are violated,
will the Vendor have to pay (i.e. indemnify) the Purchaser for those representations, warranties, and
covenants not being true?
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Reports, and FREE Legal Information on the DL Blog. Since launching in November 2008, Dynamic
Lawyers has been featured in various local and national media.
Michael Carabash is a Greater Toronto Area Business Lawyer
and the Founder/President of www.DynamicLawyers.com
He can be reached at (647) 680-9530.

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