Change-of-control clause
A change-of-control clause is a contract provision that treats a shift in who owns or controls a company as a triggering event — allowing termination, consent, or an acceleration right — even though the company itself has not transferred any assets. It most often appears in leases, loan agreements and franchise or supplier contracts.
In a share sale, the operating company does not change; its shareholders do. That distinction matters legally, but a change-of-control clause is written specifically to close the gap — it can let a landlord terminate a lease or a lender call a loan due, purely because ownership shifted, even though the tenant or borrower is technically the same corporation as before.
Where it commonly hides
- Commercial leases, which frequently define a change of control as equivalent to an assignment
- Loan and credit agreements, where a lender wants the right to reassess the borrower if ownership shifts
- Franchise and key supplier agreements, which often require the franchisor or supplier’s consent to a change of control
The mistake people actually make
Assuming a share sale avoids the third-party consent problem that an asset sale has to deal with openly. It often just moves the same problem into a differently labelled clause — one that diligence teams can miss precisely because it is filed under "change of control" rather than "assignment," even though it produces the same practical result.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Treadstone LawLegal commentaryAnti-Assignment Clauses in Supplier Contracts
- 02Treadstone LawLegal commentaryLoan Covenants in Ontario Business Acquisition Financing
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