How do I structure a purchase when the target has multiple owners?

With several owners, the structure decides whose signature you need. In a share purchase, each owner is a seller. In an asset purchase, the corporation is the seller and its shareholders may have to approve. Agree on the route in the letter of intent, because the approvals, the people who sign and the paper that follows all change with it.

Buying shares: every owner who sells must sign

A share purchase is a contract with each shareholder. An owner who does not sign stays a shareholder, so ask whether anyone can be compelled to sell and what the articles or any shareholder agreement say. Ask whether each seller gives its own promises, or whether they are shared, because that decides who answers to you if something proves wrong. BDC describes representations and warranties and indemnities as parts of the purchase agreement.

Buying assets: the corporation sells

Under s.189(3) of the Canada Business Corporations Act, a sale, lease or exchange of all or substantially all of a corporation’s property, other than in the ordinary course of business, requires shareholder approval. Under s.189(8) it is adopted when the holders of each class or series entitled to vote approve it by special resolution. A shareholder may dissent under s.190(1)(e). Ontario’s OBCA has a parallel in s.184(3), and other provinces have their own statutes.

Check the vote thresholds and the allocation

The CBCA provides that if the articles or a unanimous shareholder agreement require a greater number of votes than the Act, those provisions prevail, subject to an exception for removing a director, so read them. On price, s.68 of the Income Tax Act applies to amounts that can reasonably be regarded as consideration in part for a disposition of property, for services or for a restrictive covenant. Settle with your accountant how the price is split among assets and covenants, and which owners give covenants.