How does a share purchase agreement work when buying a business in Alberta?

This page covers Alberta only, and a corporation governed by Alberta’s Business Corporations Act. For what the agreement is, see what a share purchase agreement is. The Alberta questions are which Act governs the transfer, whether the corporation’s restrictions bind the buyer, and what the seller must hand over so the transfer can be registered.

Which Act governs the transfer

Section 47 of the Business Corporations Act says that, except as otherwise provided in that Act and the Civil Enforcement Act, the transfer or transmission of a security is governed by the Securities Transfer Act. Section 49(1) requires the corporation to maintain a securities register recording the securities it issues in registered form. For each class or series, the register shows the name and current contact information of each person who is or has been a security holder, the number of securities held by each, and the date and particulars of each issue and transfer. Ask to see it. Ask your lawyer which notices Alberta’s corporate registry needs after closing.

When a transfer restriction binds the buyer

Section 62 of the Securities Transfer Act says a restriction on transfer imposed by the issuer, even if otherwise lawful, is ineffective against a person without knowledge of the restriction unless one of two things is true. Either the security is certificated and the restriction is noted conspicuously on the certificate, or it is uncertificated and the registered owner has been given a notice of the restriction by a person required to give that notice to make the restriction effective. The Act defines “knowledge” as actual knowledge. A buyer who wants to be sure should ask for the certificates and every document that restricts transfer before signing.

What the seller must supply

Section 85(1) of the Securities Transfer Act says that, unless otherwise agreed, the transferor must on demand supply the purchaser with proof of authority to transfer or with any other requisite necessary to obtain registration of the transfer. Under subsection (2), if the transfer is not for value, the transferor need not comply with the demand unless the purchaser pays the necessary expenses. Under subsection (3), a purchaser may reject or rescind the transfer if the transferor fails within a reasonable time to comply. Because the rule applies unless otherwise agreed, check what the share purchase agreement says about the documents to be delivered at closing. BDC describes the representations and warranties section as where the vendor formally describes the condition of the business and makes disclosures about any issues or problems of which it is aware.