When one is purchasing (or selling) a business, there are
generally 2 routes – a share purchase or an asset purchase.
In this article, we are going to give an overview of the share
purchase process.
In a share purchase, the purchaser(s) will typically buy all of
the issued and outstanding shares of the target corporation(s) from
the vendor(s). This means that the purchaser(s) indirectly acquire
all of the assets, rights, liabilities, etc. of the target
corporation(s).
Because some of these liabilities may be undisclosed,
unquantifiable, or unknown, generally the deal will be structured
so as to minimize these risks through a combination of due
diligence, representations & warranties, indemnities, and
escrow provisions. Used wisely, such measures can minimize the
effect of these liabilities on the purchaser. How we document these
deals is a reflection of the ongoing due diligence process and
negotiation of these points.
