The Promissory Note For Shares is a specialized financial instrument used in Canadian business transactions where financing is provided in exchange for future share issuance or transfer. This document type is particularly valuable in scenarios such as corporate financing, investment arrangements, or business acquisitions where immediate share issuance may not be desirable or possible. It provides a legally enforceable promise to pay while simultaneously documenting the share consideration, combining elements of both debt and equity instruments. The document must comply with Canadian federal legislation including the Bills of Exchange Act and provincial securities laws, making it essential to structure the agreement properly to ensure enforceability and regulatory compliance. It's commonly used in startup financing, corporate restructuring, and investment scenarios where parties wish to defer share issuance while maintaining legal certainty about the transaction terms.
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1. Parties: Identification of the Maker (borrower/promisor) and Payee (lender/promisee) including full legal names and addresses
2. Promise to Pay: Clear statement of the unconditional promise to pay, including the principal amount and currency
3. Share Consideration: Details of the shares being issued or transferred, including class, number, and issuing corporation
4. Payment Terms: Specification of payment schedule, interest rate, maturity date, and calculation method
5. Share Transfer Mechanics: Process and timing for the transfer or issuance of shares upon payment
6. Prepayment Rights: Terms and conditions for early payment of the note
7. Events of Default: Circumstances that constitute default and consequences thereof
8. Remedies: Rights and remedies available to the Payee upon default
9. Notice: Requirements for giving notice between parties
10. Governing Law: Specification of applicable Canadian jurisdiction
1. Security: Include when the note is secured by collateral other than the shares
2. Share Rights and Restrictions: Include when specific rights or restrictions attach to the shares
3. Tax Matters: Include when specific tax treatment or obligations need to be addressed
4. Subordination: Include when the note needs to be subordinated to other debt
5. Acceleration: Include when specific events can trigger immediate payment
6. Guarantees: Include when a third party is guaranteeing the obligation
7. Transfer Restrictions: Include when there are limitations on transferring the note or shares
1. Payment Schedule: Detailed schedule of payment dates and amounts
2. Share Certificate: Copy or details of the share certificate(s) to be issued
3. Corporate Resolution: Resolution authorizing the issuance of shares and/or the promissory note
4. Share Rights and Restrictions: Detailed description of any special rights or restrictions attached to the shares
5. Security Agreement: If applicable, details of any security arrangements
Relevant legal definitions
Agreement
Business Day
Corporation
Default
Event of Default
Interest Rate
Interest Payment Date
Issue Date
Maker
Maturity Date
Notice
Outstanding Principal
Payee
Payment Date
Permitted Transferee
Person
Principal Amount
Shares
Share Certificate
Share Transfer Date
Share Rights
Security Interest
Subscription Price
Transfer
Transfer Agent
Business Day
Corporation
Default
Event of Default
Interest Rate
Interest Payment Date
Issue Date
Maker
Maturity Date
Notice
Outstanding Principal
Payee
Payment Date
Permitted Transferee
Person
Principal Amount
Shares
Share Certificate
Share Transfer Date
Share Rights
Security Interest
Subscription Price
Transfer
Transfer Agent
Clauses
Promise to Pay
Payment Terms
Interest
Share Issuance
Share Transfer
Representations and Warranties
Events of Default
Remedies
Security
Notice
Assignment
Amendment
Waiver
Severability
Entire Agreement
Governing Law
Prepayment
Default Interest
Share Rights
Transfer Restrictions
Subordination
Further Assurances
Time of Essence
Counterparts
Independent Legal Advice
Payment Terms
Interest
Share Issuance
Share Transfer
Representations and Warranties
Events of Default
Remedies
Security
Notice
Assignment
Amendment
Waiver
Severability
Entire Agreement
Governing Law
Prepayment
Default Interest
Share Rights
Transfer Restrictions
Subordination
Further Assurances
Time of Essence
Counterparts
Independent Legal Advice
Relevant Industries
Financial Services
Investment Banking
Private Equity
Venture Capital
Technology Startups
Professional Services
Real Estate
Manufacturing
Retail
Healthcare
Mining and Resources
Agriculture
Clean Technology
Relevant Teams
Legal
Finance
Treasury
Corporate Development
Investments
Compliance
Risk Management
Board of Directors
Executive Leadership
Corporate Secretary Office
Relevant Roles
Chief Financial Officer
Corporate Lawyer
Investment Manager
Financial Controller
Corporate Secretary
Treasury Manager
Investment Banker
Private Equity Manager
Venture Capitalist
Business Development Director
Corporate Finance Manager
Legal Counsel
Compliance Officer
Risk Manager
Company Director
Board Member
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