Cross-Border Share Purchase: What US Buyers Need to Know Acquiring an Ontario Corporation

On the surface, a US company buying the shares of an Ontario corporation looks like any other acquisition: a letter of intent, due diligence, a purchase agreement, a closing. Nothing about the mechanics changes just because the buyer's head office is in Chicago instead of Toronto.

What changes is the structuring analysis behind that paperwork. A non-resident buyer faces decisions a Canadian-to-Canadian deal never raises — starting with who, exactly, will hold the shares once the deal closes — plus a tax and closing-logistics layer a purely domestic transaction skips entirely.

This article covers the acquisition itself: the structural choices and closing mechanics that get a US buyer from a signed letter of intent to a completed share purchase of an Ontario corporation. It is not about what happens to the ownership structure afterward — for the governance and ownership terms that matter once a cross-border ownership structure is in place, see our companion piece on cross-border shareholder agreements. And if you're first wondering whether an American can even hold shares or sit on the board of a Canadian corporation, start with Can an American Be a Director or Shareholder of a Canadian Corporation? This piece assumes the answer is yes, and picks up at the transaction itself.

Every Ontario acquisition starts with the same threshold question: are you buying the assets of the business or the shares of the corporation that owns them? Our asset purchase vs. share purchase entry walks through the general trade-offs — liability exposure, tax basis, contract assignment — and those fundamentals don't change because the buyer is American.

What changes is how much weight each factor carries from across the border. An asset deal lets a non-resident buyer cherry-pick what they take on and leave most undisclosed historical liabilities with the seller (not all of them: under Ontario's Employment Standards Act, 2000, employees the buyer keeps on generally bring their prior service with them) — a meaningful comfort when your diligence team is reviewing an unfamiliar legal system from a distance. A share deal means the corporation's full history comes with it: past tax filings, employment claims, environmental exposure, contracts you haven't seen. That history is harder to fully underwrite when counsel and advisors are conducting diligence remotely, on a compressed timeline, without the local market knowledge a Canadian buyer's team would bring to bear.

At the same time, sellers frequently prefer a share sale for their own tax reasons, and some target businesses — those holding licences, permits, or contracts that aren't transferable — effectively require one. A US buyer should expect the structuring conversation to happen earlier and more deliberately than in a domestic deal, and should budget more diligence time, not less, to compensate for being further from the target.

Before the purchase agreement is drafted, a US buyer needs to decide who is actually going to be the buyer on the signature page. Broadly, there are two paths: the US company (or a US individual) acquires the shares of the Ontario target directly, or the US buyer first incorporates a Canadian acquisition entity — often called AcquireCo or Canco — and that entity becomes the purchaser and, after closing, the direct parent of the target.

This is not a formality. It is a structural choice with consequences that follow the deal for years:

• Tax planning. Holding the target through a Canadian entity creates flexibility for how acquisition debt is structured, how profits are repatriated to the US parent, and how a future sale is taxed — questions for a cross-border tax specialist to answer before signing, not after.
• Liability containment. A Canadian holding entity can sit between the US parent and the operating business, which some buyers use to ring-fence Canadian operational risk.
• Governance. Whether the target continues to be governed by the Canada Business Corporations Act or Ontario's Business Corporations Act after closing affects who can sit on its board — including whether a resident-Canadian director is required. We cover that rule in detail in Can an American Be a Director or Shareholder of a Canadian Corporation? rather than repeat it here, but it belongs in the same conversation as the acquisition-entity decision, since the two are often decided together.
• Future exit. How you hold the target now shapes how cleanly it can be sold, restructured, or wound down later.

There is no default right answer — it depends on deal size, the buyer's existing US structure, and how the US parent plans to use the Canadian business going forward. What matters is that it gets decided deliberately, with Canadian and US advisors in the same conversation, before it is baked into the purchase agreement by default.

US buyers sometimes ask whether their existing corporate counsel — deeply experienced in US M&A — can simply run the deal. The honest answer is no, not on their own. The target is an Ontario corporation, so Ontario and federal corporate law governs how its shares are validly transferred, how its board approves the transaction, what searches and registrations confirm clean title to the shares, and how security is registered against the target's assets if the deal involves acquisition financing. None of that is US counsel's area of practice, however good they are at what they do.

In practice, the deals that go smoothly involve both teams working together rather than one replacing the other: US counsel handles the buyer's home-jurisdiction structuring, financing, and internal approvals, while Canadian counsel handles everything that touches the target — the purchase agreement's Canadian legal provisions, corporate approvals and minute book review, registrations under Ontario's Personal Property Security Act where security is involved, and the closing mechanics below. Bringing Canadian counsel in at the letter-of-intent stage, rather than after the purchase agreement is drafted, avoids rework and surfaces structuring issues — like the acquisition-entity question above — while they are still cheap to fix.

US buyers and their counsel are often familiar with the idea of withholding on real estate sales to non-resident sellers. Canada has an analogous rule that can reach a share deal: under section 116 of the Income Tax Act (Canada), if any of the shareholders selling into your acquisition is a non-resident of Canada and the shares are taxable Canadian property (for shares of a private corporation, broadly, where more than 50% of their value came from Canadian real property, resource property or timber resource property at any time in the previous 60 months), the purchaser can become responsible for withholding a portion of the purchase price and remitting it to the Canada Revenue Agency — unless the seller obtains a clearance certificate confirming that the Canadian tax on the sale has been paid or secured.

This catches non-resident buyers off guard for two reasons. First, it is triggered by the seller's residency, not the buyer's — a US buyer acquiring a target with an entirely Canadian-resident cap table won't encounter it at all, but that can't be assumed without confirming it. Second, the exposure runs to the buyer: if the required withholding isn't made and no clearance certificate is in hand, the purchaser — not just the seller — can be left owing the CRA 25% of the purchase price in excess of any certificate limit, due within 30 days after the end of the month in which the shares were acquired.

The purchase agreement should address vendor-residency representations and, where relevant, a purchase-price holdback or escrow mechanism tied to obtaining the certificate before closing. Whether the shares are taxable Canadian property, whether treaty relief is available, the certificate timeline, and how it interacts with the broader deal tax structure are questions for a tax specialist, not something to estimate from a template — get one involved as soon as the cap table is confirmed, not the week before closing.

The legal mechanics of closing a share purchase in Ontario are not exotic, but a handful of practical details take longer, or need more planning, when the buyer is not in the same country.

• Signatures. Electronic signatures are generally valid for commercial agreements in Ontario under the Electronic Commerce Act, 2000, which helps when signatories are scattered across time zones — but some documents in a closing set may still call for original signatures or notarization, and a US corporate signatory's authority sometimes needs to be evidenced with a certificate or resolution a Canadian registry will accept.
• Funds flow and currency. Wiring the purchase price across an international border takes coordination — confirm timing with both banks well before closing day, agree in advance which currency the price is stated and paid in, and build in a buffer for exchange-rate movement if there's a gap between signing and closing.
• Corporate approvals on both sides. The US buyer's own board or member approvals, and the target's shareholder and director approvals, need to be collected and available at closing — easy to delay when sign-off requires people in different time zones and different corporate governance regimes.
• Investment Canada Act notification. A US buyer acquiring control of a Canadian business (including through a Canadian acquisition entity it controls) generally has to file a notification under the Investment Canada Act, either before closing or within 30 days after it, even where the deal is far below the threshold for a full net-benefit review (for private-sector US investors, $2.179 billion in enterprise value in 2026, adjusted annually). Any investment by a non-Canadian, whatever its size, can also be reviewed on national security grounds, and much larger deals may need pre-merger notification under the Competition Act (in 2026, broadly where the target's Canadian assets or revenues exceed $93 million and the parties together exceed $400 million).
• One shared closing checklist, not two. The most common source of last-minute delay in a cross-border deal is each side's counsel tracking their own closing items independently. A shared, dated checklist reviewed by both the US and Canadian teams is worth the extra coordination it takes to set up.

None of this needs to slow the deal down materially. It does need to be planned for, rather than discovered the week of signing.

Everything above gets you to a signed, funded, closed share purchase. What happens after that — how the board is run, how profits move between the US parent and the Canadian target, how a future disagreement between the US parent and any remaining Canadian co-owner gets resolved — is a separate set of questions, and it deserves its own planning. If your acquisition leaves a Canadian co-owner in place alongside the US buyer, our guide to cross-border shareholder agreements covers the governance, currency, and dispute-resolution terms that matter once a cross-border ownership structure already exists.

At Lamba Law, our buying and selling a business practice can act for US buyers acquiring Ontario businesses or for Canadian sellers on the other side of that table, and can work alongside a buyer's existing US counsel rather than duplicate their work. For a broader domestic checklist covering due diligence and the documents involved in any Ontario acquisition, see Buying a Business in Ontario alongside this article. This is general information, not legal or tax advice for your transaction — get a cross-border tax specialist and Canadian counsel involved early, while your structure is still easy to change.