In Canada, a business can be purchased via: (i) a share purchase; (ii) an asset purchase; or (iii) a merger.

The target may use a controlled auction process to solicit potential buyers, but the board of directors is expected to act in the best interests of the corporation, and courts will usually defer to the reasonable business judgment of the board of directors.

Typically, a share sale is less complex than an asset sale because in a share sale, the company's assets, employees, contracts, etc. remain with the company.

In Canada, amalgamations and plans of arrangement are the primary merger structures. Both require a target shareholders' meeting and supermajority approval of the transaction (two-thirds of the votes cast). Plans of arrangement also require court supervision.

Amalgamations are statutory mergers effected by filing articles of amalgamation. In general, amalgamations under Canadian corporate law result in each of the amalgamating corporations continuing in the amalgamated corporation. The amalgamating corporations cease to exist as entities separate from the amalgamated corporation and the amalgamated corporation possesses all the property and is subject to all the liabilities of each amalgamating corporation. There is usually an amalgamation agreement to record the respective rights, obligations and liabilities of the parties involved in an amalgamation transaction. A notice of meeting containing disclosure that is sufficient to allow shareholders to make an informed decision must be delivered to shareholders entitled to vote on the amalgamation.

Plans of arrangement are statutory mergers effected by filing articles of arrangement. A plan of arrangement is a very flexible way to structure an acquisition. It can be used to deal with complex tax issues, to amend the terms of outstanding securities (e.g., convertibles, options, warrants or debentures) and to assign different rights to different holders of securities. Plans of arrangement are also often used when a non-Canadian buyer wants to use its own securities as consideration. Plans of arrangement have the additional benefit of being eligible for an exemption from the SEC's registration and disclosure requirements for securities that the buyer offers as consideration. Plans of arrangement are court-supervised, requiring interim court approval and, following approval by the target's shareholders, final court approval. The parties will enter into an arrangement agreement to record the respective rights, obligations and liabilities of the parties. Information similar to that required for an amalgamation must also be delivered to shareholders entitled to vote on an arrangement.

Private companies are typically limited companies. It is typical for the articles of a private company to provide that the authorized capital consist of an unlimited number of shares. The Canada Business Corporations Act confers all powers of a natural person on a corporation. There is no requirement under the laws of any jurisdiction in Canada for a minimum amount of paid-in capital.

Limited companies may be private or closely held non-offering corporations or corporations offering securities to the public (offering corporations). The articles of a non-offering corporation/private company may contain restrictions on transfers of securities and may prohibit the offering of securities to the public or to more than 50 shareholders (excluding certain employees); however, those restrictions can be removed with the approval of the shareholders. This generally only happens where a company is undertaking, or planning to undertake, an initial public offering or other transaction that results in its securities being publicly traded.

A "private issuer" must be beneficially owned by no more than 50 persons, not including employees and former employees of the company or its affiliates. Each person is counted as one beneficial owner unless the person is created or used solely to purchase or hold securities of the company, in which case each beneficial owner or beneficiary must be counted as a separate owner. There is no requirement that a private company be a private issuer (which is subject to further requirements in relation to the types of persons allowed to be shareholders); however, private issuers benefit from expanded prospectus exemptions available under securities laws.

Generally, all that is required to transfer legal title to the shares in a Canadian non-offering corporation is for a stock transfer form to be executed by the seller and then registered in the register of shareholders of the relevant corporation. Depending on the restrictions in the corporation's articles, prior approval by the corporation's board of directors and/or shareholders may also be required. A share purchase agreement is usually prepared to record the agreement of the parties on their respective rights, obligations and liabilities in connection with the transaction.

When a business is being transferred by way of an asset purchase, each individual asset needs to be transferred in accordance with the formalities for a transfer that apply to that type of asset. For some assets, this will simply be a case of delivering the asset to the buyer. In other cases, the formalities are more prescriptive, such as in the case of real property or intellectual property. Therefore, it is necessary to include a provision, either in the purchase agreement governing the purchase of the business and its assets or in separate agreements, for the relevant formalities to be complied with. As with a share acquisition, there is usually an asset purchase agreement to record the respective rights, obligations and liabilities of the parties.