Preference Share Subscription Agreement for Canada

Preference Share Subscription Agreement Template for Canada

A comprehensive legal agreement governed by Canadian law that establishes the terms and conditions for the subscription of preference shares in a company. This document outlines the rights, privileges, and obligations attached to the preference shares, including dividend rights, voting rights, and liquidation preferences. It contains detailed provisions regarding the subscription process, payment terms, representations and warranties, and closing conditions, all while ensuring compliance with Canadian federal and provincial securities regulations. The agreement serves as a crucial instrument for companies raising capital while providing investors with specific preferential rights and protections under Canadian corporate law.

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What is a Preference Share Subscription Agreement?

The Preference Share Subscription Agreement is a vital legal document used when a company wishes to issue preference shares to investors under Canadian law. It is commonly employed in capital raising scenarios where investors seek preferential rights over common shareholders, such as priority dividend payments or enhanced voting rights. This document is essential for both private and public companies across Canada seeking to structure sophisticated investment arrangements. The agreement must comply with the Canada Business Corporations Act and relevant provincial securities legislation, making it particularly important to address regulatory requirements and investor protection measures. The document typically includes comprehensive details about the share terms, subscription process, representations and warranties, and various protective provisions for both the issuing company and the investors.

What sections should be included in a Preference Share Subscription Agreement?

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

2. Background: Context of the share issuance, including company's authorized capital and purpose of the preference share issuance

3. Definitions and Interpretation: Key terms used throughout the agreement and rules of interpretation

4. Subscription for Preference Shares: Details of the subscription including number of shares, price per share, and total subscription amount

5. Preference Share Rights: Detailed rights attached to the preference shares including dividend rights, voting rights, liquidation preferences, and conversion rights

6. Payment and Closing: Terms of payment, closing mechanics, and delivery of share certificates

7. Representations and Warranties of the Company: Company's confirmations regarding its authority, share capital, and business condition

8. Representations and Warranties of the Subscriber: Subscriber's confirmations regarding investment capacity, understanding of risks, and compliance with securities laws

9. Covenants: Ongoing obligations of the parties

10. Conditions Precedent: Conditions that must be satisfied before closing

11. Termination: Circumstances under which the agreement can be terminated

12. Notices: Process for formal communications between parties

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

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

1. Anti-dilution Protection: Provisions protecting preference shareholders from dilution in certain circumstances

2. Tag-Along Rights: Right of preference shareholders to join in sale of shares by other shareholders

3. Drag-Along Rights: Right to force preference shareholders to join in sale of company

4. Pre-emptive Rights: Right of first refusal on future share issuances

5. Board Representation: Rights of preference shareholders to appoint directors

6. Information Rights: Special rights to receive company information

7. Registration Rights: Rights related to registration of shares for public trading (relevant for planned IPOs)

8. Foreign Investment Provisions: Special provisions required for foreign investors under Investment Canada Act

What schedules should be included in a Preference Share Subscription Agreement?

1. Schedule A - Share Terms: Detailed terms and conditions attached to the preference shares

2. Schedule B - Form of Directors' Resolution: Form of resolution approving the share issuance

3. Schedule C - Disclosure Schedule: Exceptions to company representations and warranties

4. Schedule D - Form of Share Certificate: Form of certificate representing the preference shares

5. Schedule E - Subscription Form: Form to be completed by subscriber with investment details

6. Schedule F - Accredited Investor Certificate: Certification of subscriber's status as accredited investor

7. Schedule G - Corporate Documents: Copies of relevant corporate documents including articles and bylaws

8. Schedule H - Shareholders' Agreement: Form of shareholders' agreement if required to be signed at closing

Authors

Alex Denne

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

Jurisdiction

Canada

Publisher

Genie AI

Cost

Free to use
Clauses
Relevant Industries

Financial Services

Technology

Real Estate

Infrastructure

Manufacturing

Energy

Mining

Healthcare

Telecommunications

Private Equity

Venture Capital

Professional Services

Biotechnology

Clean Technology

Relevant Teams

Legal

Finance

Corporate Development

Treasury

Compliance

Corporate Secretariat

Investment

Board of Directors

Executive Leadership

Risk Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Corporate Lawyer

Investment Manager

Company Secretary

Finance Director

Private Equity Manager

Venture Capital Partner

Investment Banker

Corporate Development Manager

Legal Counsel

Compliance Officer

Board Director

Investment Analyst

Treasury Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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