Underwriting Agreement Template for Canada

A Underwriting Agreement sets out the terms between a company issuing securities and the investment banks that will sell those securities to investors. When Canadian companies want to raise money through stocks or bonds, they partner with underwriters who promise to buy and resell these securities, managing the risks of the public offering.

The agreement covers key details like the offering price, underwriter commissions, and timing of the sale. It also includes important protections for both sides, following requirements set by Canadian securities regulators. Investment dealers registered with IIROC (Investment Industry Regulatory Organization of Canada) typically act as the underwriters, helping companies navigate the complexities of raising capital in Canadian markets.

Companies need a Underwriting Agreement when raising capital through an initial public offering (IPO) or secondary offering on Canadian markets. This agreement becomes essential once you've decided to work with investment banks to distribute your securities and need to lock in the terms of their commitment to buy and resell your shares or bonds.

Time your Underwriting Agreement early in the offering process, ideally after selecting your lead underwriter but before filing your final prospectus with Canadian securities regulators. The agreement helps secure financing terms, establish distribution networks, and protect both parties during the critical phases of bringing securities to market - especially important given Canada's strict disclosure requirements.

• Firm Commitment Underwriting: Most common in Canadian IPOs - underwriters guarantee to buy the entire offering and resell to investors, providing certainty of funds
• Best Efforts Underwriting: Underwriters try their best to sell securities but don't guarantee full placement - typically used for riskier offerings
• Standby Underwriting: Underwriters agree to purchase any unsold shares in a rights offering to existing shareholders
• Syndicated Underwriting: Multiple investment banks share the risk and distribution, with specific roles for lead and co-managers
• Mini-Maxi Underwriting: Sets minimum and maximum offering amounts, protecting both issuer and underwriter if market response falls short

• Issuing Companies: Canadian corporations seeking to raise capital through public offerings - they initiate the agreement and commit to selling their securities
• Investment Banks: IIROC-registered dealers who underwrite the offering, managing distribution and often providing price stabilization
• Securities Lawyers: Draft and negotiate the agreement terms, ensuring compliance with Canadian securities regulations
• Corporate Officers: Sign on behalf of the issuing company, making representations and warranties about business conditions
• Securities Regulators: Review the agreement as part of the offering documentation, ensuring investor protection standards are met

• Basic Deal Terms: Gather offering size, price range, underwriter compensation, and distribution arrangements
• Due Diligence: Compile financial statements, corporate records, material contracts, and regulatory filings
• Team Assembly: Identify lead and co-underwriters, legal counsel, and key company representatives
• Timeline Planning: Map out key dates for prospectus filing, pricing, closing, and regulatory approvals
• Risk Assessment: Document market conditions, company-specific risks, and required disclosures
• Document Platform: Use our automated system to generate a legally compliant agreement that incorporates all essential elements and Canadian securities requirements

• Purchase Commitment: Clear terms of the underwriters' obligation to buy securities, including price and quantity
• Representations & Warranties: Issuer statements about business condition, financial accuracy, and legal compliance
• Closing Conditions: Requirements for deal completion, including legal opinions and comfort letters
• Indemnification: Protection for underwriters against issuer misrepresentations or disclosure failures
• Commission Structure: Detailed breakdown of underwriting fees and expense arrangements
• Termination Rights: Specific circumstances allowing parties to cancel the agreement
• Distribution Terms: Rules for marketing and selling securities in Canadian markets

A Underwriting Agreement differs significantly from an Agency Agreement in several key aspects, though both involve intermediaries helping companies raise capital. While underwriting agreements commit investment banks to purchase securities outright, agency arrangements create a different relationship with less financial risk for the intermediary.

• Risk Structure: Underwriters take ownership of securities and bear market risk; agents simply facilitate sales without purchasing securities themselves
• Compensation Model: Underwriters earn through the spread between purchase and selling prices; agents receive straight commissions on sales
• Legal Obligations: Underwriting agreements include extensive representations and warranties about the offering; agency agreements focus on marketing and distribution duties
• Market Impact: Underwriting provides certainty of funding and typically supports larger offerings; agency arrangements are common for smaller or specialized placements