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Anatomy of a Share Purchase Agreement

By November 12, 2013June 27th, 2023Buying a Practice, Selling A Practice

In my previous blog, I discussed the anatomy of a typical asset purchase agreement (in the context of a dentist purchasing the assets of a dental practice from another dentist or dentistry professional corporation, etc.). In this blog, I will discuss the anatomy of a typical share purchase agreement in the context of a dentistry professional corporation purchasing the shares of another dentistry professional corporation from a vendor dentist (i.e. a human being).


The Introduction identifies the nature of the agreement, the date of the agreement and the parties involved (i.e. a Purchaser dentistry professional corporation and a vendor dentist human being).


The Background section provides context to the deal. In this agreement, the Purchaser dentistry professional corporation is buying the shares of another dentistry professional corporation (the “Corporation“) from a selling dentist. The background section will usually identify where the practice is located and the fact that shares of that Corporation are being bought/sold.


  • Article I –Definitions and Interpretation: defines key terms used throughout the rest of the Agreement.
  • Article II – Purchase of Assets: identifies the purchase price, how it will be paid, and adjustments. We don’t have to worry about price allocations here because HST is not payable on the sale of shares of a dentistry professional corporation.
  • Article III – Closing Arrangements: explains the mechanism for closing the transaction (when, where, how, etc.).
  • Article IV – Vendor Indemnities: the Vendor personally agree to be responsible to the Purchaser for liabilities which occurred BEFORE the closing (e.g. employment-related liabilities, lease-related liabilities, debts of the Corporation, etc.); the Purchaser agrees to be responsible to the Vendor for certain liabilities which occur AFTER the closing.
  • Article V – Employee Matters: this may include things like a requirement that the Vendor provide notice or payment in lieu of notice to their staff prior to the closing; the purchaser offering / maintaining employment to the existing employees after the Closing; and who will be responsible for termination costs after the closing (e.g. Vendor for the first 3 months, Vendor and Purchaser for the next 3 months equally, and Purchaser after the first six months after closing).
  • Article VI – Corporate Tax Returns and Taxes: the Vendor will pay to have an accountant prepare the Corporation’s final tax return and T4s (prior to the closing) and file them and pay for any taxes due for the period prior to the Closing.
  • Article VII – Accounts Receivable: if accounts receivable aren’t included in the deal (which is typical), then they will need to be transferred out of the Corporation prior to the sale. Then, when the Purchaser dentistry professional corporation receives any of those accounts receivable, it will remit them to the Vendor on a monthly basis (perhaps for a set period of time). The Vendor will give the Purchaser a list of Accounts Receivable on the Closing Date.
  • Article VIII – Work in Progress: Vendor will give us a list of work in progress, etc.
  • Article IX – Representations and Warranties of the Vendor: these are promises made by the Vendor about the Corporation, the Shares, the Dental Practice, the Assets, the Employees, the Financials, the Patients, etc. that are supposed to be true and which the Purchaser is relying upon to enter into this agreement.
  • Article XRepresentations and Warranties of the Purchaser: these are promises made by the Purchaser about the Purchaser that are supposed to be true and which the Vendor is relying upon to enter into this agreement.
  • Article XI – Interim Operation of the Dental Practice: from the time the parties sign up until the closing, the Vendor will continue to maintain the Dental Practice (e.g. book new patients, maintain assets, not remove patient records, etc.).
  • Article XII – Access to Books, Records, Etc.: the Purchaser will be given access to books, records, etc., about the Assets, Dental Practice, and Vendor in order to complete the deal. The Vendor will also be required to maintain records (it doesn’t provide to you as part of the deal) and give the Purchaser access to them if required, for example, for tax or litigation matters or matters of professional accountability.
  • Article XIII – Associate Agreement: the parties agree that they will enter into an associate agreement and perhaps some of the basic terms can be included here.
  • Article XIV – Covenants of the Vendor: the Vendor agrees to do certain things (e.g. get discharges for any debt registrations, transfer phone numbers after the closing, provide a letter of introduction, allow the Purchaser to continue using its name for up to one year after the closing).
  • Article XV – Conditions of Closing – Purchaser: these are the conditions of closing which must be satisfied in order for the Purchaser to close the deal (e.g. financing, equipment inspection, chart audit, transfer/amendment of lease, etc.). Please be mindful of the timeframes!
  • Article XVI – Conditions of Closing – Vendor: these are the conditions of closing that must be satisfied (please note the timeframes we’re working with) in order for the Vendor to close the deal.
  • Article XVII – Restrictive Covenants: these are the non-compete and non-solicitation provisions.
  • Article XVIII – General Terms: these are standard terms that govern the agreement.Schedules: these form part of the agreement. These may include things like the appraisal, excluded assets, employee information, financial statements, material contracts, and the lease.

So there you have it—a synopsis of a typical share purchase agreement. But don’t kid yourself if you think this is straightforward. Every day is so very different and depends on its unique circumstances. There are so many nuances and pitfalls. If you’re looking for a dental lawyer to help you draft and negotiate an asset purchase agreement that promotes your interests and protects your rights, contact DMC LLP.

The Content of this post is provided for informational purposes only. It is not intended to be legal, financial, tax, or other professional advice of any kind. You are advised to contact DMC (or other counsel) to seek specific legal advice concerning your individual situation.