The transfer of shares involves the movement of ownership of shares in a corporation from one party, the transferor, to another, the transferee. In the case of a private Ontario or federal corporation, the transfer of shared follows an internal process and does not involve any stock exchange or public regulator, though the applicable steps must be carefully followed. A valid transfer of shares in a private corporation requires compliance with any corporation restrictions.

What restrictions exist on the transfer of shares?

The majority of private corporations restrict the persons who may hold their shares. Restrictions of this kind are ordinarily found in the corporation’s articles of incorporation, its by-laws, or a shareholders’ agreement, and commonly include a right of first refusal, a requirement of board approval, or restrictions triggered by events such as death or resignation. For more information, refer to Restrictions on transfer of shares.

How do you document the transfer?

• Preparation of a share transfer form or, for a more substantial transaction, a Share Purchase Agreement identifying the transferor, the transferee, the class and number of shares, and any consideration.
• Approval of the transfer by Directors’ Resolution, transfers being ordinarily subject to director consent under the articles.
• Where the shares are certificated, surrender and cancellation of the existing certificate, and issuance of new certificates to the transferee and, in respect of shares retained, to the transferor.

Updating the corporate records

Both the Ontario Business Corporations Act (OBCA) and the Canadian Business Corporations Act (CBCA), require every corporation to maintain a securities register recording the shares it has issued and the identity of the holders, and the transfer takes effect on the corporation’s records once entered in this register.

What are the filing requirements?

Where the transfer alters control of the corporation or affects information on file, an Ontario corporation may be required to file a notice of change with the Ontario Business Registry. Directors and officers should further confirm whether the transfer triggers any tax filing or election.

Public corporations

A publicly traded corporation transfers shares through licensed brokers and clearing systems, governed by securities legislation and the Securities Transfer Act, rather than by the internal process applicable to a private corporation.

Illustration

Where a shareholder of a private OBCA corporation holding five hundred shares wishes to sell one hundred shares to a colleague, and the board approves the transfer by resolution, confirming that it does not contravene any right of first refusal in the shareholders’ agreement, the existing certificate is cancelled, new certificates are issued reflecting the division of shares, and the securities register is updated to record the colleague as holder of one hundred shares.

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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