Ontario Asset Purchase Agreement Template

What an Ontario asset purchase agreement is for

Most small businesses in Ontario change hands as asset sales. The buyer gets the equipment, inventory, customer relationships, name, website and goodwill, and usually the premises lease. The seller keeps its corporation, its bank account and its debts. That structure protects the buyer from the seller's old liabilities, but only if the agreement draws the lines clearly: which assets are included, which liabilities stay behind, what happens to the staff, how inventory is counted on the last day, how HST is handled, and what the buyer can do if something the seller said turns out to be wrong.

This agreement covers all of it. It defines the assets and excluded assets, assumed and excluded liabilities, the price with an optional vendor take-back and earn-out, an inventory count and statement of adjustments, a holdback, the tax allocation and elections, fifteen seller representations, pre-closing covenants and searches, an employee transfer section built on ESA section 9, closing deliveries and conditions, non-competition, indemnities and termination. Eight schedules include the price allocation and a closing checklist.

When to use it

Use it to buy or sell an Ontario business worth roughly $50,000 to a few million dollars: a café, salon, dental lab, landscaping company, retail store, marketing agency, e-commerce brand or trades business. It works whether the seller is a corporation or a sole proprietor, and whether or not the buyer takes over the lease.

Do not use it for a share purchase (where the buyer buys the company itself, liabilities and all), for a business with real estate (the land needs an agreement of purchase and sale and a real estate lawyer), or for a franchise resale, which needs the franchisor's consent and Arthur Wishart Act disclosure. Both sides should have their own lawyer and accountant.

What's inside

The full list of sections and fields in this template, in the order they appear.

1. Parties and definitions

   • Seller
   • Principals
   • Buyer
   • Business
   • Effective Time
   • Encumbrance

2. Assets and liabilities

   • Equipment
   • Inventory
   • Contracts
   • Premises lease
   • Intellectual property and goodwill
   • Permits
   • Prepaids
   • Excluded assets
   • Assumed and excluded liabilities

3. Price and payment

   • Deposit
   • Closing balance
   • Holdback
   • Vendor take-back note
   • Earn-out
   • Inventory count and adjustment
   • Statement of adjustments

4. Tax matters

   • Price allocation
   • HST section 167 election
   • Section 56.4 election
   • Section 22 election
   • Buyer's tax registrations

5. Representations

   • Seller's 15 representations
   • Buyer's representations

6. Before closing

   • Due diligence access
   • PPSA and execution searches
   • Ordinary course covenants
   • Lease and contract consents
   • Risk of loss

7. Employees

   • Offers
   • ESA section 9 continuity
   • Seller's obligations
   • Employee information

8. Closing

   • Electronic closing
   • Seller's deliveries
   • Buyer's deliveries
   • Conditions
   • Transition assistance

9. Covenants, indemnities and termination

   • Non-competition and non-solicitation
   • Indemnities
   • Time and dollar limits
   • Set-off
   • Confidentiality
   • Termination and deposit

10. General and signatures

    • Expenses
    • Brokers
    • Notices
    • Assignment
    • Governing law
    • Independent advice

11. Schedules A to H

    • Equipment and vehicles
    • Assumed contracts
    • Permits
    • Price allocation
    • Permitted encumbrances
    • Employees
    • Major customers and suppliers
    • Closing checklist

Preview pages

How to complete the agreement

1. Identify the parties and the business. Include the seller's principals, who give personal representations and the non-compete.
2. List what is sold and what is excluded. Complete Schedules A to C: equipment, contracts and permits.
3. Set the price and payment. Choose the deposit, holdback, and any vendor take-back or earn-out, and fix the target inventory value.
4. Agree on the allocation. Fill in Schedule D with your accountants before signing.
5. Confirm the HST election. Check that the section 167 election is available and that both parties are registered.
6. Review the representations. Adjust them to the business, and disclose exceptions in the schedules.
7. Decide on employees. List every employee in Schedule F and mark who will be offered a job and on what terms.
8. Set the conditions and dates. Lease consent, financing, due diligence and key employees, each with a deadline.
9. Close with the checklist. Work through Schedule H, count inventory the day before closing, and file Form GST44 with the buyer's next HST return.

Example: selling a café

A fictional seller, Maple & Grind Coffee Inc., sells its Kingston café to 2864491 Ontario Inc. (owner Farah Haddad) for $185,000, closing March 31, 2026.

Allocation: inventory $9,000 (target); espresso machines and equipment $38,000; leasehold improvements $22,000; goodwill, name, website and social accounts $115,999; restrictive covenants $1. Payment: deposit $15,000; holdback $18,500 (10%) for 12 months; vendor take-back $40,000 over 36 months at 7%; balance at closing $111,500. Inventory count on March 30: $7,850, so the price drops by $1,150, to $183,850. HST: both are registered and Farah's company takes over everything needed to run the café, so they elect under section 167; no HST is charged. Staff: four baristas accept Farah's offers; under ESA section 9 their service continues, so one barista with six years' service keeps her three weeks of vacation.

Ontario rules to know

• No Bulk Sales Act. Repealed in 2010; buyers rely on PPSA and execution searches, discharges and the holdback.
• Sale of a business and employees (ESA section 9). Employment the buyer continues is not terminated; service carries over.
• Non-competes (ESA section 67.2). Banned for employees, except the seller who becomes the buyer's employee right after a sale, and executives.
• HST (Excise Tax Act section 167). No HST on a qualifying sale of a business with a joint GST44 election.
• Restrictive covenants (Income Tax Act section 56.4). A joint election can keep the non-compete payment from being taxed as ordinary income.
• Liquor licences and permits. Liquor licences transfer only with AGCO approval; municipal business licences and food premises approvals are usually new applications.
• Personal information. Customer and employee data may be shared for the transaction if the buyer agrees to protect it (PIPEDA section 7.2).

Where business sales go wrong

The disputes after a small business sale tend to repeat. The buyer discovers a supplier with a security interest over the equipment because nobody searched the PPSA register. Inventory was "included" at a fixed value, and the shelves were half empty on closing day. The seller's two-year-old HST debt or WSIB premiums come looking for the business. A key employee was never offered a job, and sues the seller for termination pay. The landlord refused to consent to the lease assignment two days before closing. The search, inventory count, holdback, employee schedule and lease condition in this agreement exist because of exactly these situations.