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Share Subscription Agreement for Canada

Share Subscription Agreement Template for Canada

A Share Subscription Agreement under Canadian law is a legally binding contract between a company issuing shares and an investor (subscriber) who wishes to purchase those shares. The agreement details the terms and conditions of the share subscription, including the number and class of shares, purchase price, payment terms, and closing conditions. It incorporates Canadian securities regulations, corporate law requirements, and includes necessary representations and warranties from both parties. The document ensures compliance with both federal and provincial regulatory requirements, including securities laws and, where applicable, foreign investment regulations.

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What is a Share Subscription Agreement?

A Share Subscription Agreement is a fundamental document used in Canadian corporate finance transactions when a company wishes to issue new shares to investors. The agreement is essential for both private and public companies seeking to raise capital through equity investment. It sets out the terms under which an investor will subscribe for shares, including the type and number of shares, price, payment terms, and conditions precedent to closing. The document must comply with Canadian federal and provincial securities laws, corporate legislation, and where applicable, foreign investment regulations. It typically includes comprehensive representations and warranties from both the issuing company and the subscriber, along with provisions for closing mechanics, regulatory compliance, and post-closing obligations. This agreement is particularly important in protecting both the issuer's and subscriber's interests while ensuring regulatory compliance in the Canadian market.

What sections should be included in a Share Subscription Agreement?

1. Parties: Identification of the issuing company and the subscriber(s)

2. Background: Recitals explaining the context and purpose of the share subscription

3. Definitions and Interpretation: Definitions of key terms and interpretation rules

4. Subscription and Purchase of Shares: Core terms of the share subscription, including number and class of shares, price per share

5. Payment Terms: Details of payment timing, method, and currency

6. Representations and Warranties of the Company: Company's statements about its status, authority, and share capital

7. Representations and Warranties of the Subscriber: Subscriber's statements about capacity, investment sophistication, and regulatory compliance

8. Closing Conditions: Conditions that must be satisfied before the subscription is completed

9. Closing Mechanics: Process and requirements for completing the subscription

10. Covenants: Ongoing obligations of the parties

11. Indemnification: Terms for compensating parties for losses from breaches

12. Confidentiality: Provisions protecting confidential information

13. Notices: How formal communications between parties should be made

14. General Provisions: Standard boilerplate provisions including governing law, amendments, assignment

What sections are optional to include in a Share Subscription Agreement?

1. Foreign Investment Provisions: Required when subscriber is non-Canadian, addressing Investment Canada Act compliance

2. Multiple Closing Mechanics: Used when the subscription will close in multiple tranches

3. Tag-Along Rights: Optional protection for minority shareholders

4. Pre-emptive Rights: Rights of existing shareholders to maintain their ownership percentage

5. Escrow Arrangements: Terms for holding funds or shares in escrow if required

6. Registration Rights: Rights to require company to register shares for public trading

7. Board Nomination Rights: Rights of subscriber to nominate directors, typically for larger investments

8. Anti-Dilution Provisions: Protection against dilution from future share issuances

What schedules should be included in a Share Subscription Agreement?

1. Schedule A - Subscription Details: Detailed information about the shares being subscribed for, including class, price, and number

2. Schedule B - Form of Share Certificate: Template for the physical or electronic share certificate

3. Schedule C - Corporate Information: Details of the company's corporate structure, capitalization, and subsidiaries

4. Schedule D - Disclosure Schedule: Exceptions to representations and warranties

5. Schedule E - Required Consents and Approvals: List of third-party and regulatory approvals needed

6. Schedule F - Form of Legal Opinion: Template for legal opinion to be provided at closing

7. Schedule G - Accredited Investor Certificate: Certification of subscriber's status as an accredited investor

8. Schedule H - Shareholders' Rights and Restrictions: Detailed terms of the rights and restrictions attached to the subscribed shares

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Canada

Publisher

Ƶ

Document Type

Agreement Contract

Cost

Free to use

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