To legally and effectively transfer shares from one individual to another within a private Canadian corporation, several steps must be followed:

Step 1: Review of the governing documents

The articles of incorporation, by-laws, and any shareholders’ agreement should be examined for transfer restrictions, requirements of board approval, or a right of first refusal.

Step 2: Documentation of the terms

Other than in the case of a simple gift between related parties, a written share transfer form or share purchase agreement should be prepared, identifying the parties, the shares, and the consideration.

Step 3: Board approval

The directors pass a resolution approving the transfer, transfers being ordinarily subject to director consent under the articles of a private corporation.

Step 4: Cancellation and reissuance of share certificates

The transferor’s existing certificate is surrendered, and new certificates are issued to the transferee and, in respect of any shares retained, to the transferor.

Step 5: Updating the securities register

The corporation is required to record the change of ownership in its securities register, as mandated under the OBCA or the CBCA.

Step 6: Filing notices where required

Where the transfer alters information the corporation has on file, including the identity of those in control, an Ontario corporation may be required to file a notice of change with the Ontario Business Registry, pursuant to the Ontario Corporations Information Act.

What special circumstances might exist?

Where shares pass by reason of death, the shares may remain in the deceased’s estate under a will or, in the absence of a will, pursuant to the applicable intestacy rules. The corporation ordinarily requires proof of authority, such as a certificate of appointment of estate trustee, before recording the new holder.

A transfer among family members, undertaken for estate-planning purposes, follows the same steps. Tax planning is recommended to address potential capital gains. A transfer to a minor or to a trust may require further documentation confirming the individual or entity legally authorized to deal with the shares.

Illustration

When a parent wishes to transfer forty of one hundred shares held in an OBCA-incorporated business to an adult child as part of succession planning, the board approves the transfer by resolution, the parent’s existing certificate is cancelled, two new certificates are issued, sixty shares to the parent and forty to the child, and the securities register is updated to reflect both holders.

Getting the legal help you need

Transferring shares can have important implications for ownership, corporate control, and tax obligations. Make sure your transaction is properly documented with a Transfer of Shares document from Legal Line Documents. Create your document quickly and affordably—it only takes a few minutes to get started.

								
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