Subscription letter Template for Canada

A Subscription letter is a legal document investors use to formally commit to buying shares or other securities in a Canadian company. It spells out the key terms of their investment, including the number of shares, price per share, and total amount they're agreeing to invest.

When raising capital in Canada, companies rely on these letters to secure binding commitments from investors before finalizing the deal. The letter protects both sides by documenting important details like payment deadlines, closing conditions, and any special rights or restrictions that come with the investment. It's especially common in private placements and must comply with provincial securities regulations.

Use a Subscription letter when raising capital from investors for your Canadian company, particularly during private placements or early-stage funding rounds. This document becomes essential once you've identified potential investors and need to formalize their commitment to purchase shares or securities.

The timing matters most when moving from verbal agreements to binding commitments. Having investors sign Subscription letters helps lock in funding terms, prevents misunderstandings about investment amounts, and ensures compliance with provincial securities laws. It's especially important before transferring funds or issuing shares, as it creates a clear paper trail for regulators and protects both parties' interests.

• Basic Private Placement: Straightforward Subscription letters for smaller investments, focusing on share price, quantity, and basic investor representations.
• Accredited Investor: More detailed versions with extensive qualifications and declarations to meet securities exemptions under National Instrument 45-106.
• Institutional Investment: Complex letters for large-scale investments, including additional warranties, due diligence requirements, and registration rights.
• Convertible Note: Specialized versions for debt that converts to equity, detailing conversion terms and triggering events.
• Industry-Specific: Tailored versions for sectors like mining or technology, incorporating sector-specific disclosures and regulatory requirements.

• Investors: Sign Subscription letters to commit funds and confirm their understanding of investment terms and risks. This includes both individual accredited investors and institutional investors.
• Company Directors: Review and approve the terms, authorize share issuance, and ensure compliance with corporate bylaws.
• Corporate Lawyers: Draft and customize the letters to meet securities regulations and protect both parties' interests.
• Securities Regulators: Monitor compliance with provincial and federal securities laws, particularly regarding private placement exemptions.
• Company Officers: Execute the letters on behalf of the issuing company and manage investor relations throughout the process.

• Investment Details: Gather exact share quantities, price per share, and total investment amount to be documented.
• Company Information: Compile corporate details, share structure, and any existing shareholder rights or restrictions.
• Investor Qualifications: Confirm investor status under securities laws and collect required documentation.
• Payment Terms: Specify payment deadlines, methods, and any escrow arrangements.
• Closing Conditions: List all requirements that must be met before shares can be issued.
• Regulatory Compliance: Identify applicable securities exemptions and required disclosures for your jurisdiction.

• Parties and Dates: Full legal names of investor and issuing company, plus execution date.
• Investment Details: Number of shares, price per share, total subscription amount, and class of securities.
• Investor Representations: Declarations about investor status, financial capacity, and understanding of risks.
• Securities Exemptions: Specific exemption being relied upon under National Instrument 45-106.
• Payment Terms: Method, timing, and conditions for payment of subscription funds.
• Governing Law: Provincial jurisdiction governing the agreement.
• Signature Block: Spaces for authorized signatures, witness requirements, and corporate seals if needed.

A Subscription letter differs significantly from an Engagement Letter in both purpose and scope. While both documents formalize business relationships, they serve distinct functions in Canadian law.

• Primary Purpose: Subscription letters specifically commit investors to purchasing securities, while Engagement letters outline professional service arrangements and fees.
• Legal Framework: Subscription letters must comply with securities regulations and exemptions, whereas Engagement letters focus on professional service standards and obligations.
• Timing and Duration: Subscription letters typically cover a single transaction with ongoing shareholder implications, while Engagement letters establish ongoing professional relationships.
• Required Content: Subscription letters detail investment amounts, share prices, and investor qualifications. Engagement letters specify service scope, fees, and professional responsibilities.
• Risk Management: Subscription letters address investment risks and securities compliance, while Engagement letters focus on service delivery and professional liability.