Private Placement Agreement for Canada

Private Placement Agreement Template for Canada

A Canadian Private Placement Agreement is a legal document that governs the private sale of securities without a public offering. This agreement, structured under Canadian securities laws including National Instrument 45-106, facilitates the sale of equity, debt, or other securities to specific qualified investors, typically accredited investors or those meeting minimum investment thresholds. The document incorporates provincial securities requirements, regulatory filings, and specific investor protections while detailing the terms of investment, representations and warranties, and compliance with Canadian securities regulations.

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What is a Private Placement Agreement?

The Private Placement Agreement is essential for Canadian companies seeking to raise capital through exempt market distributions. This document is used when companies wish to issue securities without the need for a prospectus, typically to accredited investors or other exempt purchasers as defined under Canadian securities legislation. The agreement must comply with various provincial securities laws and national instruments, particularly NI 45-106, which provides the regulatory framework for prospectus exemptions. Common scenarios for using this agreement include growth capital raises, pre-IPO rounds, and strategic investments. The document contains crucial elements such as subscription details, investor qualifications, securities transfer restrictions, and regulatory compliance requirements specific to the Canadian market.

What sections should be included in a Private Placement Agreement?

1. Parties: Identifies the issuer, purchaser(s), and any other relevant parties to the agreement

2. Background: Sets out the context of the private placement, including the issuer's business and the purchaser's interest in acquiring securities

3. Definitions: Defines key terms used throughout the agreement

4. Securities Being Purchased: Details the type, class, and number of securities being issued and their purchase price

5. Purchase and Sale: Core transaction terms including payment mechanics and closing conditions

6. Closing: Specifies the closing date, location, and deliverables required from each party

7. Representations and Warranties of the Issuer: Issuer's statements about its business, financial condition, and authority to issue securities

8. Representations and Warranties of the Purchaser: Purchaser's statements, including accredited investor status and investment intent

9. Covenants: Ongoing obligations of the parties, including reporting requirements and use of proceeds

10. Resale Restrictions: Details of hold periods and transfer restrictions on the securities

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

12. Indemnification: Provisions for compensating parties for losses arising from breaches

13. General Provisions: Standard legal provisions including notices, amendments, governing law, etc.

What sections are optional to include in a Private Placement Agreement?

1. Registration Rights: Grants investors rights to require registration of their securities for public trading - include when negotiated with institutional investors

2. Board Representation: Grants investors right to appoint board members - include for significant investments

3. Pre-emptive Rights: Gives investors right to participate in future offerings - include for strategic investors

4. Tag-Along Rights: Allows investors to join in sale of controlling interest - include for minority investor protection

5. Information Rights: Specifies additional financial reporting obligations - include for major investors

6. Anti-Dilution Protection: Protects investors from dilution in future rounds - include for early-stage investments

7. Dividend Rights: Special dividend provisions - include for preferred share offerings

8. Conversion Rights: Terms for converting securities - include for convertible securities

9. Exit Rights: Mechanisms for investors to exit investment - include for illiquid investments

What schedules should be included in a Private Placement Agreement?

1. Schedule A - Subscription Details: Detailed information about the securities being purchased, including price and number of units

2. Schedule B - Accredited Investor Certificate: Certification and evidence of accredited investor status

3. Schedule C - Corporate Resolution: Corporate authorization for the transaction

4. Schedule D - Risk Factors: Detailed description of investment risks

5. Schedule E - Financial Statements: Recent financial statements of the issuer

6. Schedule F - Material Contracts: List and summary of material contracts affecting the investment

7. Schedule G - Capitalization Table: Pre and post-investment capitalization structure

8. Schedule H - Use of Proceeds: Detailed breakdown of how investment proceeds will be used

9. Schedule I - Investor Rights: Detailed terms of any special investor rights granted

10. Appendix 1 - Form 45-106F1: Required regulatory filing form for exempt distribution

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

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What is a Private Placement Agreement?

What sections should be included in a Private Placement Agreement?

What sections are optional to include in a Private Placement Agreement?

What schedules should be included in a Private Placement Agreement?

Authors

Alex Denne

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